Skalvar thanks for the answers; Let me tell you I love the idea of NC, and will be using it in some form. Right now I am just trying to figure out how to make it work for my game. And I understand being busy with the day job; not all of us can be as lucky to have our ideas published and live off only that.
So back to questions..
Spells and Weapons and Things
I still am not completly sold on weapon damage. Thanks for explaining spells thought. What I was thinking about doing was having the PC's roll there damage and adding it to the attack roll, and treating it like normal. So that lets say Baldric from the example would add 1d8+4 str+d6 for flaming, then add that to the attack roll for purposes of calculating dice. So Baldric's sword would add anywhere from 6 to 18 to the attack roll, which would be maybe a one or two dice. The DM would adjust the template's threshold to be just as challenging.
Position
Kind of figured that position triggered conditions/events in the template. I do plan on using at Ranged and melee positions, maybe even an near melee position; close but not in the fray.
What page number is -1d penalty mentioned on?
As to Geoff's objections, yes, this system could be used to limit PC choose. All that is really needed is for the DM to be flexable and adjust to alternative ways for the PC's to "win". But then DM's have been doing just that for awhile. I think the important thing is NC should be used so that a side combat doesnt end up taking all night. NC as a system lets the DM spend appropriate time on an encounter, depending on how important that encounter is to the story.