So let me get this all straight.

GPRS is when your data services are working perfectly.

gprs is when you're doing better than GSM, but not as good as GPRS

GSM is traditional cell coverage.

correct?

Yes that's correct.

GSM is cell phonbe coverage.
gprs is connected to your providers data network.
GPRS is connected to the BlackBerry infrastructure.

There are 4 stages: gsm, GSM, gprs and finally GPRS.

Everyone should be most concern on getting at least GSM for voice. When you get GPRS, all voice and data features should be working. In order to have email and browsing, you must have GPRS. The small letters gsm and gprs are transitional stages and really should not stay there for long.
Keep in mind that in some area, your phone may stay with GSM and occassionally gprs appears and it falls back to GSM. This usually indicates that you get voice coverage and the phone sees some sort of data coverage, keeps trying to get onto GPRS but fails for whatever reasons.

I believe, as well, if you have voice but no data, it will stay on "gprs" (lowercase) and say something like "Data Connection Refused". Yet you will still have full GSM functionality.

In the GSM world, voice and data is really separated into GSM and GPRS, whereas GSM is a pre-requisite for GPRS. You must have GSM connection to get GPRS connection. Thus the 4 stages. Look at the small letters as service registration stages. gsm, found GSM service, logging in. GSM, logged in for voice service only. gprs, now that I got GSM and see data coverage, trying to register for data. GPRS, all set for data too.

Small gprs sometimes means you don't have your service books.