This closly matches my experiances with learning dvorak. I never quite managed to type qwerty without looking at the keys. I actually knew where the keys were, but something in my brain clicked into super-doubt mode if I wasn't actually looking at the keys.

I only ever used software methods for changing the keyboard layouts. I dived in head first, switched on the dvorak layout, and kept it that way. I taped a print out of the dvorak layout to the edge of my monitor, and found keys I didn't know based or where they were in relation to the home row. It was slow at first, but got faster purely through force of use.

A strange side effect of using this method was that for a good while I could switch between typing dvorak and qwerty purely based on whether I was looking at the screen or the keyboard.
It's been so long now since I've really used a qwetry layout that I can't still use this trick, but it was certainly interesting. On the other hand I've now used dvorak enough that on the rare occation when one hand is busy, I've found I can mostly hunt-n-peck on a dvorak board, even without matching keycaps.

Another weird side effect I ran into had to do with the number row. Most of the standard dvorak layouts I've run across leave the number row the same as it is on a qwerty layout. As a result, this was one area that I never quite learned not to look at the keys. One day I noticed that the original dvorak proposal had remapped the number keys as well, placing the most common digits under the strongest fingers (much along the same theory as the rest of the dvorak system). This essentialy has the numbers counting outward from the index fingers toward the pinkies, with the odd digits on one hand and the evens on the other. (see the picture in the tribe photo section to see what I mean.) So I setup a keymap that used the original number layout and started using it. Of course it cured me of looking at my hands for these few remaining keys, but it also gave me a point of comparison for when people ask me how hard it was to learn dvorak. When I was originally learning dvorak, I didn't really pay attention to how long it took me to get to the same typing speed as I had before. (though I eventually I surpassed that speed, probably partly due to not having to look at my hands.)
Anyway, I was in a position of re-learning a portion of the keyboard while having the rest of the keyboard as a comparison point. It took me about 3 weeks before my number typing skill caught up with the rest of my typing.
Now of course this is a limited test, and learning an entire keymap would surely take longer than re-learning just 10 keys. I also have a computer job, and use a keyboard no less that 40 hours a week, and typically more. I hope that even with these caveats, the data is useful.

Anyway, I now use dvorak nearly exclusively (with the only exception being when I use someone elses computer). I fully agree with the idea that the best way to learn is to just dive right in, don't change the key caps, and have patience early on when it's slow going.

Good luck!

::update::

I've been on dvorak for less than 2 weeks now, and my speed is steadily improving.

I've actually been using the model M keyboard as well Ben and I was very happy with how well it converts over to dvorak after seeing others switch theirs. I decided to change the keys not because I have to look at them when I type, but because of the shortcut issues. ctrl-c and ctrl-v aren't as easy anymore.

My sole suggestion, apart from what is already here is to find some software that teaches dvorak, sit down with it and learn all of the keys at once. Do not switch back and forth between qwerty and dvorak at all, cold turkey is good.

I used the KP Typing Tutor (www.fonlow.com/zijianhuang/kp/) which i was happy with.
A friend really liked Ten Thumbs (www.runrev.com/tenthumbs/index.shtml) which is non-free, or requires cracking.

Thats all! Thanks everyone for you insight and tips for the transition.

Hear, hear. Looking at the keys is another good habit to drop while you're kicking qwerty.

I popped up the visual keyboard on the screen while I was learning (and I did get a touch typing tutor - ten thumbs, perhaps? One that 'knew' dvorak -- that's important.) It's pleasant to watch the dvorak words like 'the' and 'there' that ripple across the home row so brilliantly, too. The visual feedback provided by generating a 'smooth' pattern was if not useful at least pretty.

I tried to remove all letters/numbers from the keyboard, but they're hard to remove. I was going to replace the keys on my next powerbook with completely blank ones, and then Apple had to go and put this gorgeous fiber-optic light-up keyboard on here. . . .

BTW, I don't think QWERTY compatibility is an issue at all. Every major OS comes with both, software switchable, nowadays anyway.