Hey ^^ Last night I flashed my phone, same version/SPL succesfully. Wait for dferraira's reply, but here's some info regarding the procedure I went through (which should theoretically be the same for you).
1. start phone in fastboot, boot recovery.img then partition SD card
No, you don't need to partition your SD card, from what I was told.
2. do a nandroid backup of original setup (or does this require engineering spl first?)
Nandroid backups don't require the Engineering SPL, you just select the option from the recovery menu and it will put it directly on to your sd card.
3. with copies of recovery, spl and update on root of SD card, fastboot, boot recovery.img then apply the splupdate.zip, when finished press green and reboot as described on spl thread.
Now at this point will the phone start as normal with new spl on original rom or do i straight away flash ion rom update.zip?
I rebooted my phone after applying the SPL to ensure it had worked properly before applying the update.zip.
4. repeat step 3 but apply update.zip, is a wipe required first? and again will this finish with green press then reboot?
Now i should have working google ion 1.6?
I initially applied update.zip
without wiping my phone, and I encountered an error in which the boot sequence kept looping around. You may not encounter this, but all I did was boot back in to recovery, wipe the phone and re-apply the update.zip. I would think wiping first is probably beneficial - after all you have your Nandroid backup.
At this point to gain root again fastboot to recovery or flash it to phone and in recover do the adb shell bit to gain root access.
Yes, once you've flashed the update.zip successfully you can obtain root. Boot into the recovery image (to allow adb root access afaik), and then use the adb shell command in your sdk\tools directory and follow the steps on the first page.
Also is it a fairly safe method, as opposed erase hboot, flash hboot? and is the crios spl the best for me you think? I have a fairly good chance my phone will live?
It's an official rom, so in that sense yes - as safe as it gets. I didn't use the crios SPL, just the stock 2004 egineering and it worked fine. Fairly good chance your phone will live
Also i have found an original HBOOT-1.33.0004, along with nandroid backup will i be able to get back to stock then if i need to send for repairs under warranty?
Presumably, yes. But which order you would flash them in, I do not know, as ION ROM needs the Engineering SPL to work, so you'd probably have to apply the stock ROM, then flash the SPL back.
Wait for dferreira's comments too, but hope this helps