Does anyone have experience enabling Adv Projects (aka Project Management) in an active environment? For example, what happens to the basic projects when you enable the more advanced feature that segregates customers from projects? Do they all get converted?

It's been so long (7+ years), that I'm not a reliable source anymore, but IIRC you can still have basic projects and advanced project at the same time and the basic project remain as such (essentially subcustomers). But again, please please test in a sandbox or something before trusting my hazy memory, and things may have changed in the interim anyway.