Thanks MonkeyMama, I was hoping you would chime in!
It looks like we have all the questions answered and all bases covered. The question 3 about future rollovers after 2010 I threw in because I read somewhere (on fidelity?) that the current provision for the 2010 rollover doesn't specifiy an end date. It is possible that congress will want people in 2011, 2012, etc. to continue the rollover because it is yet another way for them to pay for programs by sacrificing the future (when someone does a rollover and pays taxes, they get money NOW instead of much later when said person retires). This government seems to like spending money, so maybe there will be more Roth opportunities after 2010.
On the other hand, like you said it probably doesn't make sense for me to pay a lot of taxes to roll over my rolled over 401k IRA into a Roth since I would pay ~35% taxes on it. I am not a big fan of paying the government now and hoping they treat me nice in the future. For my wife though, since she could rollover with no tax liability, it is a no brainer.
I hope our example cleared up any questions others may have had, or maybe they didn't even realize the IRS treats all of your IRA accounts as one single account when it comes to rollovers.
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