I'm concerned that if we push camera manufacturers too hard on noise they will smooth files in-camera in ways we have no control.
I think Canon are smart enough to avoid doing this. There are too many watchful and critical people around who would pick this up immediately. I guess you are referring to the way the D2X handles noise. At high ISOs noise is very low, but only with the extra NR filter switched on, which smooths the image and reduces resolution. However, Nikon have very sensibly provided a choice of using this extra filter or not.
I understand 'on chip' processing refers to processing that takes place before
the A/D conversion.