Note: See "EDIT" for the answer to the current question
First of all, read Subversion Re-education by Joel Spolsky. I think most of your questions will be answered there.
Another recommendation, Linus Torvalds' talk on Git: http://www.youtube.com/watch?v=4XpnKHJAok8. This other one might also answer most of your questions, and it is quite an entertaining one.
BTW, something I find quite funny: even Brian Fitzpatrick & Ben Collins-Sussman, two of the original creators of subversion said in one google talk "sorry about that" referring to subversion being inferior to mercurial (and DVCSs in general).
Now, IMO and in general, team dynamics develop more naturally with any DVCS, and an outstanding benefit is that you can commit offline because it implies the following things:
- You don't depend on a server and a connection, meaning faster times.
- Not being slave to places where you can get internet access (or a VPN) just to be able to commit.
- Everyone has a backup of everything (files, history), not just the server. Meaning anyone can become the server.
- You can commit compulsively if you need to without messing others' code. Commits are local. You don't step on each other's toes while committing. You don't break other's builds or environments just by committing.
- People without "commit access" can commit (because commiting in a DVCS does not imply uploading code), lowering barrier for contributions, you can decide to pull their changes or not as an integrator.
- It can reinforce natural communication since a DVCS makes this essential... in subversion what you have instead are commit races, which force communication, but by obstructing your work.
- Contributors can team up and handle their own merging, meaning less work for integrators in the end.
- Contributors can have their own branches without affecting others' (but being able to share them if necessary).
About your points:
- Merging hell doesn't exist in DVCSland; doesn't need to be handled. See next point.
- In DVCSs, everyone represents a "branch", meaning there are merges everytime changes are pulled. Named branches are another thing.
- You can keep using continuous integration if you want. Not necessary IMHO though, why add complexity?, just keep your testing as part of your culture/policy.
- Mercurial is faster in some things, git is faster in other things. Not really up to DVCSs in general, but to their particular implementations AFAIK.
- Everyone will always have the full project, not only you. The distributed thing has to do with that you can commit/update locally, sharing/taking-from outside your computer is called pushing/pulling.
- Again, read Subversion Re-education. DVCSs are easier and more natural, but they are different, don't try to think that cvs/svn === base of all versioning.
I was contributing some documentation to the Joomla project to help preaching a migration to DVCSs, and here I made some diagrams to illustrate centralized vs distributed.
Centralized

Distributed in general practice

Distributed to the fullest

You see in the diagram there is still a "centralized repository", and this is one of centralized versioning fans favourite arguments: "you are still being centralized", and nope, you are not, since the "centralized" repository is just repository you all agree on (e.g. an official github repo), but this can change at any time you need.
Now, this is the typical workflow for open-source projects (e.g. a project with massive collaboration) using DVCSs:

Bitbucket.org is somewhat of a github equivalent for mercurial, know that they have unlimited private repositories with unlimited space, if your team is smaller than five you can use it for free.
The best way you can convince yourself of using a DVCS is trying out a DVCS, every experienced DVCS developer that has used svn/cvs will tell you that is worth it and that they don't know how they survived all their time without it.
EDIT: To answer your second edit I can just reiterate that with a DVCS you have a different workflow, I'd advise you not to look for reasons not to try it because of best practices, it feels like when people argue that OOP is not necessary because they can get around complex design patterns with what they always do with paradigm XYZ; you can benefit anyways.
Try it, you'll see how working in "a private branch" is actually a better option. One reason I can tell about why the last is true is because you lose the fear to commit, allowing you to commit at any time you see fit and work a more natural way.
Regarding "merging hell", you say "unless we are experimenting", I say "even if you are experimenting + maintaing + working in revamped v2.0 at the same time". As I was saying earlier, merging hell doesn't exist, because:
- Everytime you commit you generate an unnamed branch, and everytime your changes meet other persons' changes, a natural merge occurs.
- Because DVCSs gather more metadata for each commit, less conflicts occur during merging... so you could even call it an "intelligent merge".
- When you do bump into merge conflicts, this is what you can use:

Also, project size doesn't matter, when I switched from subversion I actually was already seeing the benefits while working alone, everything just felt right. The changesets (not exactly a revision, but a specific set of changes for specific files you include a commit, isolated from the state of the codebase) let you visualize exactly what you meant by doing what you were doing to a specific group of files, not the whole codebase.
Regarding how changesets work and the performance boost. I'll try to illustrate it with an example I like to give: the mootools project switch from svn illustrated in their github network graph.
Before

After

What you are seeing is developers being able to focus on their own work while commiting, without the fear of breaking others' code, they worry about breaking others' code after pushing/pulling (DVCSs: first commit, then push/pull, then update) but since merging is smarter here, they often never do... even when there is a merge conflict (which is rare), you only spend 5 minutes or less fixing it.
My recommendation to you is to look for someone that knows how to use mercurial/git and to tell him/her to explain it to you hands-on. By spending about half an hour with some friends in the command line while using mercurial with our desktops and bitbucket accounts showing them how to merge, even fabricating conflicts for them to see how to fix in a ridiculous ammount of time, I was able to show them the true power of a DVCS.
Finally, I'd recommend you to use mercurial+bitbucket instead of git+github if you work with windows folks. Mercurial is also a tad more simple, but git is more powerfull for more complex repository management (e.g. git rebase).
Some additional recommended readings:
+1 For getting me read about Mercurial, I am SVN guy too :) – M.Sameer – 2011-04-21T18:19:52.543
Any update on the results of trying DVCS? – alternative – 2011-06-01T21:29:43.253
I installed it today, and it works. It's all I can say for now. I'll provide you with more feedback after a week or two of usage. – None – 2011-06-08T14:36:58.720
Great. Remember the most important thing to actually try is to merge conflicts. – None – 2011-06-12T22:22:43.677
@Thorbjørn Ravn Andersen: this is not relevant to us. We rarely get conflicts for the following reasons: we apply principles like SOLID and continuous integration. In addition to that we promote pair programming when two developers must work on the same area of the code. – None – 2011-06-15T09:49:42.063
2@Pierre, that is because you only work on a single branch. When you reach maintenance mode and needing to port changes back and forth between branches this might change. – None – 2011-06-15T09:55:50.737
@Thorbjørn Ravn Andersen: It didn't so far. We are no different, we have release branches like most software project. I really think the difference is how we organize our work. – None – 2011-06-15T10:09:53.233
1You are working in a private branch if you ever check out a copy of the code to work on. Infact, this is the only way to use most version control systems. Subversion and other centralised VCS systems place a very significant restriction on this private branch - namely, you can have only one revision. (Some, like perforce, don't even let you safely merge without committing the current changes first in case the merge fails!) – Arafangion – 2011-08-09T23:18:39.210
3@Joonas No, one server can serve 2000 repositories and each programmer can check out the repository he needs. Its actually more efficient that way, anyways. – alternative – 2011-10-31T20:50:30.533
I've been using Mercurial and SVN concurrently on different projects and can honestly say that whatever problems DVCS is solving are problems I never have. With SVN, we have about a dozen team members who all commit multiple times a day and merges are needed maybe once a month and take 5 minutes. It's just inherent to the type of work we do. I understand conceptually why it is better, but no it won't give a benefit to everyone. Still, you should upgrade because why not. – jiggy – 2012-02-03T00:57:13.683
17-1 for the Katy Perry reference. ;) – Amadiere – 2012-03-05T12:04:36.993
1+1 for the Kate Perry reference :P – NlightNFotis – 2013-08-19T05:54:54.307
8I'm also very interested in this. Subversion fits the way I've been taught to think about version control (having come from CVS and the like). Nevertheless, while I've had to use Mercurial and Git to try some bug fixes for open source projects I haven't been converted yet. – Berin Loritsch – 2011-01-09T14:06:04.627
I personally see DVCS as an increase in steps therefore more likely to have problems, with one of the most basic things needed comit, you comit locally then have to push to a server(chances are someone will foget for a long time). where as CVCS you comit and everything is done, – Mumbles – 2011-01-09T14:54:42.947
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+1 for the question. Nowadays it has become cargo cult that distributed is simply better, faster, simpler, more natural and trouble-free and 90 % shinier compared to centralized. Except that it necessarily isn't. They're different tools, and each may have advantages in some contexts and disadvantages in other contexts.
– Joonas Pulakka – 2011-01-09T16:29:56.1172Branches are just not a first-class citizen in SVN-land the way they are in DVCSs. – Paul Nathan – 2011-01-09T17:02:16.280
2See edit to my answer. Regarding the cargo cult comment, don't let blind followers that are not able to defend DVCSs fool you. Subversion works, nobody argues that, DVCSs just let you work more naturally. See my edit to this second version of the question. – dukeofgaming – 2011-01-09T20:53:27.533
3@Joonas I think you should support your argument a little more before throwing words like "cargo cult" around.
svnwas my first version control system and I used it happily for years. I switched togitfor the simple fact that it gave me a larger and more powerful set of tools for managing my source code---not because some mysterious stranger with a scraggly UNIX beard fed me kool-aid spiked with something suspicious. – Sharpie – 2011-01-09T22:26:22.41717@Sharpie: Having used both
svn,gitandhgfor years, I'm pretty well aware of their pros and cons. Whilegitis certainly the most powerful of these, it's important to acknowledge that more powerful doesn't automatically imply better. Emacs is certainly more powerful than any javascript text editor running in web browser, but, strangely, I'm writing this comment into a javascript browser text editor right now! Simplicity, even stupidity, has value in many contexts. Using centralizedsvnand something likegit-svnlocally offers the best of both worlds. – Joonas Pulakka – 2011-01-10T07:35:11.5902@Joonas: The distributed model puts at least one extra repository between my dumb mistakes and the rest of the team which is incredibly valuable no matter the project. Because of that, I can't understand the label "cargo cult" (going through the motions of something for no benefit). – Sharpie – 2011-01-10T19:00:30.717
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@Sharpie: It's good for you that you like it. But one man's pro is another man's con. Some people consider the clarity of a single centralized repository with a single canonical trunk incredibly valuable. Here's a presentation on how Google keeps the source code of all its projects, over 2000, in a single code trunk containing hundreds of millions of code lines, with more than 5000 developers accessing the same repository. Would you rather prefer 5000 servers and the history of 2000 projects on everyone's desk?-)
– Joonas Pulakka – 2011-01-11T07:31:29.667@Pierre, this isn't really an answer, but here are two links that have helped me in my slow progress to git-fu.
– Benjol – 2011-03-07T12:48:53.807@Benjol: thanks Benjol, I really appreciate – None – 2011-03-07T13:06:22.227