Let's address this one by one.
What sort of problems does one encounter?
As you said: it's based on Testing, so while Testing is more stable and only gets packages that don't kill the whole experience, occasional problems may occur. That being said, most of the time those problems revolve around proprietary drivers (nVidia, ATI, Broadcom), but most of the time you can use the in-kernel open drivers, which work for most hardware configurations (sometimes needing additional firmware files, but that's mostly for network drivers). Other than that, Testing is stable enough for daily use, at least in my opinion. I've been using it more or less (with a full migration to Sparky a couple months back) for around 2 years without any major issues.
How much command line knowledge is required?
Not much. Partitioning knowledge would be nice during the installation. Other than that, it's pretty straight-forward and most daily maintainence can be done with GUI tools (like Sparky APTus for upgrading and such).
How far from beginner must one be (I'm arguably between beginner and intermediate - I've played with conky & tint2 code, and once I even toyed with a debian netinstall, but I don't have much command line experience).
Some knowledge would be nice, but not some Linux expert type of knowledge. What I mean are rather habits of using other GUIs than Windows and not expecting another Windows to appear, but since you already used other distros, then you'll be fine.
Also remember, that any problems you may have with Sparky, you can post on the forums. Sparky is basically two architectures: x86 and x86_64, so the amount of problems are limited and there's a good chance, that you'll find an answer to your problem as well. And if not, we're here to solve them.
PS. way12go has been posting a lot of tutorial posts lately, so there's a good chance you'll find some of them useful too.
@way12go: thanks for your tutorial posts. Some of them will probably hit the Wiki as soon as we get it up and running.