Mamaduck- I can't answer all your questions, but can at least give you the benefit of our experience!
You can rent edging sanders- they'll get the bits around the edge of the room and save you having to do it by hand.
We had a friend refinish our floors summer before last and here's how he did it: sanded (he taped every last seam in every single cupboard and every single door and window with painters tape and butcher paper- it saved a HUGE amout of cleaning up- the dust is pernicious!)and then applied a coat of varnish: let it dry and buffed: applied another coat: let it dry and buffed and then I *think* he applied a third coat, let it dry and buffed it shiny. The floor was GORGEOUS. (the kids have since beat the crap out of it but it looked great for a week! Our floors are fir- not so durable as hardwood) You can get buffing sheets that fit on the sander like the sandpaper does and you buff with that.
My understanding with the varnish is that the quicker drying and better quality, the more expensive it is. Think my mom was going to use this awesome stuff (bonitech?) til she found it cost $70 a gallon wholesale...
We, unfortunately, used the cheap stuff (non-water based) and I wish we hadn't but it would have taken twice as long to cure between coats, as well as being twice as expensive. We had to vacate our house while the floors were refinished because it is a filthy, toxic experience. The last coat had been curing for over 24 hours when we came back and we had to go get a hotel that night because the fumes just knocked you over. It took a couple weeks for them to fade entirely and to be honest, if I were going to do it in hindsight I'd either wait til the kids were older (and send-away-to-camp-able) or spring for the less toxic varnish.
Cove molding is easy to install- think I swiped my dh's old lino-roller to make it go on smoothly. I put it in the kitchen, where it's not so visible under the cupboards but think it would have looked not so nice in the living room against the wood- have you considered wood molding? I've installed that before and it's pretty easy. Not as cheap, though.
Good luck- and make sure you wear a respirator while doing both the sanding and the varnishing! And send the kids elsewhere. (ok- no more nagging