I want to keep the fans down to a single one on the cpu.
Actually, it's often quieter to have two separate low noise fans than one fan which has to work harder - especially as you are splitting the heat between two separate parts rather than making one part (the CPU) run hotter.
The new AMD Kaveris are supposed to have a superior graphics engine to that of the Intel crop.
Yes, but CPU performance and power consumption is quite a bit worse.
It may work out to be a better balance for ROHQ though.
My understanding is that Chroma upscaling still needs to happen even with Blurays as the Chroma information is stored at 1/4 size.
Yes, chroma upscaling is required, though it's not
too demanding, as it's always scaled 2x and Madshi has optimized for that.
And just so I understand, all this really only needed if I upscale DVD? If I just want to play DVD as is (standard def), and bluray as is (HD), than it any chip should be fine? Or are there other video processing that ROHQ must do that would require a lot GPU horsepower?
I would not recommend that - most displays do not have very high quality scaling at all. (which is why you would want to do it on the HTPC)
madVR (ROHQ) is going to get a debanding feature in the next release which will considerably improve lower quality sources, but requires more GPU power.