I agree with everything you have said. Cycling infrastructure is vital if more than the dedicated few are going to ride bikes around our cities. It isn't because people don't want to ride, it is because at the moment it is difficult to ride (and often scary). I love cycling to work and would ride more often if I didn't have to worry so much about traffic, safety etc. Weather and hills are a secondary consideration to concerns of getting run over.
I've recently moved from Dunedin to Wellington and am impressed with the number of people who ride here. The weather is on par - more wind but warmer and the hills are more significant I think, but the feeling on the road is different. There are signs all over the city that cycling is an acceptable way to get around, there is some infrastructure (we need heaps more) and in general, drivers are more willing to give you room, wait until it is safe to pass etc.
There is a real opportunity to do something in CHCH at the moment and I really hope it is taken up by those driving the reconstruction.