For now, this blog emphasizes rooting.
installing cyanogen mod 7 is not rooting. It's helpful to be clear on these distinctions because people have posted to support forums saying "Hey, I rooted my NC and now I can't use feature X." It can take time to learn that no, the nook isn't rooted, it's running a whole different OS that does not have the BN features. If you install CM7 to internal memory, there's no guarantee that BN can't figure out that that's been done even if you reset to stock, though I would be surprised if they bothered.
Also, booting from an sd card is not rooting.
Rooting is a process that lets you change the BN software so you keep and can use it all the time, but also have full access ("root" access) to your Nook Color. Rooting adds the full android market so any Android app is available. The library and shop are usually also available..
Booting from an SD card lets you pick a different OS and use it off of an external card. The other OSes are generally Android 2.3, android 3 or android 2.2. The OS is generally slower, since it's not installed on the fast internal memory. If you want to use the full BN software (Nook shop, nook library, nook apps,) you need to restart your nook.
Dual booting can be done entirely on the internal memory. This lets you have both the stock BN software and andoid 2.3 (Cyanogen) running on the fast internal memory. Again, you need to pick one to run at boot time. (you could also dual boot Cyanogen and Honeycomb or Cyanogen and Nookie Froyo; in those cases, neither OS would have the BN library app.
Installing another OS to internal memory completely rips out the BN software and replaces it with completely unlocked android. You get all of the internal memory dedicated to your new OS, and you can install the Nook app in your new OS to keep shopping for books at BN. You won't be able to do magazine subs or read to me, though, just books, as I understand it.
You can revert to the BN stock OS after doing any of these modifications. It is unlikely that BN would know about it if you had done a mod, reverted it, and returned it for service unless the reason you returned it for service is that the display completely failed. I would think that it would be pretty hard to revert to stock if you could not see the screen. There would be ways to do it, but they'd be a challenge.
BN appears not to repair nooks and send them back to owners after a warranty return. It looks like they send you someone else's nook they've repaired and pronounced refurbished, and put yours at the back of the repair queue.
So far there are no reports of BN getting failed modded hardware and a few weeks later billing the owner for the work because they figured out that the device had been modded.