A topic of expertise for me, well I like to think so. I helped someone else on this forum build a complete new system by giving him ideas and recommendations.
1. If you want just DVD functionality with no navigation, I would recommend the Kenwood DDX6019 ($700 @
http://www.crutchfield.com, if you've never shopped with them before, let me know, I'll get you $20 off). If you are looking for navigation capability, I would recommend the Pioneer Avic D3X (now comes in a package on Crutchfield with Bluetooth and iPod adapter for $1000), the Pioneer Avic Z2X, or the Alpine IVA-W205 (optional navigation). All of these will sit nice and flush which I think is what you're looking for. Crutchfield gives you all of the instructions for the installation along with freebies like wiring harnesses and awesome awesome technical support on anything.
2. No you don't have to change the speakers. You'll notice better sound just buying a new head unit, but buying new speakers will make it sound even better. What will happen is that you'll bypass the Bose amp, which is a good thing, with a wiring harness provided.
3. You can keep the dual climate controls, it'll take a little work though. You can replace the button with the button from your set. There was someone who did this a while ago and posted it, I think.