1. If I add the chips to the empty spaces, am I going to need to add caps at C20, C21, C22 and C23?
I've seen people get away without those caps. But your mileage may vary. do the hack and see how it performs. If you have memory access problems, do the caps too.
2. On the mod description I have, it says to enable the added RAM as chip RAM you need to set J2 to 2-3, and J7A to 2-3. If this works for the RAM added to the board, would it work for RAM added at trapdoor expansion?
No. You can't have more than 1mb chip ram with 8372A.
http://amiga-hardware.com/showhardware.cgi?HARDID=1448
3. Is Santa Claus real?
yes.
4. Will Fat Angus 8372A allow for 1MB Chip RAM?
yes.
tip, if you want more than 1mb chip ram through trap door, save yourself the trouble and get an A500+ ;-) 8375 has a different pinout, and I haven't seen any hack that would allow to use a 8375 on a plain A500 (aside from 2mb chip ram boards of course).