Hey Foxy,
Great work on the hairy golf ball! I haven't spent a lot of time playing with the particle system on Blender, but it's amazing.
Also the weight painting is a great idea for the particles. Great tutorial!
As for rigging the caterpillar, the tutorial that I listed above does a great job explaining how to do it, and it used weight painting too. The reason my caterpillar looks like it's dancing and having a seizure is because I kind of twisted him up when I was adding/editing the bones.
I'm glad that you guys are playing with Blender too, It's getting me excited about checking out new things.
As for the particle collision, I'll check into it after I get some work finished for a class I'm teaching this summer.
Please check out my Colors! Gallery when you get a chance. -
http://colors.collectingsmiles.com/author.php?page=1&id=3427