shayelk:
Thank you for the thorough answer, it's not often that you see such answers in online forums 
No problem - if you look at my posting history (here and elsewhere) - you'll find that I am a fan of writing books...

shayelk:
Well, I'd say it's more like I've run a half marathon, swam a mile , and competed in some cycling contests, but I have no Idea how a triathlon works, and would like to start working towards one:
- I know how to choose and assamble components for a quadcopter to handle a desired mission
- I have a lot of theoretical and some hands-on experience with electronics (both analog and digital)
- I wrote apart of a control algorithm for a quadcopter using both C and LabVIEW- I used a ready-made controller (a KK2) and modeled the quadcopter as a black box which gets stick commands and outputs hight and attitude change rates, to control the quad position. (the computer was connected via D2A converter to the remote control and position and attitude feedback were obtained using a set of IR cameras - so basically I programmed a pilot) and I have a pretty solid understanding of the inner model (the part between the command and the change rates, which I overrode the last time)
- I know how to use IMU data to calculate attitude and position
- I'm a decent solderer

Ok - so it sounds like you have the chops for this kind of a project; just like anything else, take it slow, break it into achievable sub-tasks, and don't get overwhelmed.
Since you've use the KK2 - you know it is based around the ATMega644P. While there aren't any official Arduino boards which use this microcontroller, it is supported in the IDE. There are small modules of this nature available if you look - for example (I know nothing about this vendor, btw - just showing it as an example ONLY):
Larger boards (using PDIP packages) are also available - look under the term "sanguino" - a popular use for them is for a hackable "game console" called the UzeBox (Open-design movement - Wikipedia). Such is likely too big for anything but the largest quadcopters, but it might work for a dev platform in a pinch.
It is also possible to find out there (with some digging) different "Mega Mini" devices - basically small breakout boards with the basics of the surface mount ATMega2560 on board.
There is also this device:
I know - it's got everything there - including the software - but nothing says you have to use it! Just think of it as an Arduino optimized for a quadcopter.
Note that on many of these oddball "Arduinos" - what you are really getting is more akin to a "barebones" system. You will likely have to install your own bootloader - or leave it off entirely and learn how to upload using an ICSP programmer or similar (btw - a standard UNO can act as such a programmer - the software to do so is available in the examples with the IDE). If this is unfamiliar territory to you - then stick with the UNO and get comfortable with it, first. Then move on to these other creatures.
shayelk:
However, I didn't get to use microcontrollers before, so I think most of the knowledge I'm lacking is about how to get inputs and write outputs with the arduino (how to translate IMU serial input to QT's and QV's for example), though there are some other things you mentioned that I still need to learn (i.e. choosing wire gauge)
sounds like a good way to go 
Given what you've written about your skills and exposure, I don't think you'll have too much of an issue picking things up.
shayelk:
I'm looking at something a lot smaller then a DJI Phantom to start with, but I'll probably change my mind once I see all the pretty toys
the budget is not too serious of a problem
Thanks again for all the input! You've been a great help!
Look into something called the "DJI Flamewheel" chassis (Hobby King sells a similar chassis - it's duped all over the place by chinese resellers). From what I have seen of it, when you have things fully outfitted on it - you basically get the equivalent of a DJI Phantom for about 2/3s of the price - if you don't mind having a wires and bits dangling and no sleek outer body, of course. Parts, of course, for that size of a quad aren't cheap (your largest expense will be in the motors and ESCs - then the batteries, not counting a charger system, of course).
However, given what you want to do - you might think about going a bit larger with your quad.
Now - that all said: What is your experience with flying a quad?
If you've played extensively with toys or actual quads, etc - then great, go forth and prosper with your project.
However, if you haven't - then go out there and get a cheap quad or two to play with and crash. There are plenty out there to choose from, but do your research: There are good ones, and not-so-good ones out there.
Hubsan makes some really decent toy quads - but they tend to be small things:
http://www.amazon.com/Hubsan-Channel-2-4GHz-Copter-Camera/dp/B00EXBDWZC
But they have great reviews all over the internet. People love 'em.
Another quad that people like (I own one of these - disclaimer here - but I am not an expert on quads by any means, and I can barely fly this one I own):
http://www.amazon.com/Version-Syma-Quadcopter-Helicopter-E-Trade/dp/B00L811EIW
It's called the Syma X5C - there are currently the original version ("version 1") - just called the "Syma X5C" - then there's a recent new version, called the "Syma X5C-2" - its supposed to be more stable, and was released last winter, IIRC. I got mine last summer, so mine is the original - and it really isn't too bad - but if you can find version 2 - go for that.
It's much bigger than the Hubsan quad - while it is possible to fly it indoors (in a house, for instance) - it's better to do so outside (which the Hubsan quad is small enough to fly well indoors decently).
Either one of these won't set you back much money, and they will give you a valuable learning experience - and if you crash and break the thing, you've only lost $50.00 or so - rather than potentially hundreds from your homebrew machine. That isn't to say it will make flying your custom quad foolproof - but it may help.
Good luck - and post back to us your success (or failure, and questions, etc - we can learn and help for just about anything - it's all useful!)...
