The A500 I ordered is said to have been tested to load up with Workbench 1.2. My understanding is that beginning with the A500 model, Kickstart was encoded directly in a ROM chip.
Correct, the first amiga: The A1000 needed a flopy kontaining the kickstart image to be loaded before it could boot WB.
And yes the A500 was the first to include all in ROM chip.
Does this mean that I'll need to upgrade the physical chip to load later versions of Workbench?
I heard that the original Amiga 1000 had Kickstart on disk, so I guess I'm wondering if later versions of Kickstart can also be booted from disk?
Yes you will need to swap the physical chip to load later WB version.
However, there are some "degraders" intended for computers like A1200 and A4000, to give them kick 1.3 and compatibility. But i have never heard of "big box" kickstarts on a floppy image...
Good luck and happy playing/programing with you new Amiga 500
EDIT: edited some typewriting... :-)