ahhh, well out of curiosity, i went and just re-tried what i tried a few weeks back
I was wrong..
You CAN upload via ISP of an Arduino and flash the bootload and upload binaries, with nothing more than just a 20mhz crystal, no caps.
You CAN'T however run a sketch and have it run with just the 20mhz crystal, eg let's say pin 0 on/1000ms/0 off , what will happen is pin 0 will trigger high or low and not turn off, no idea what's going on here.
Interesting, to simply flash a new bootloader or upload a sketch, the Cap's don't appear to be needed!