I don't have my Incredible 2 anymore, but the Android Open Kang Project (A.K.A. AOKP and spearheaded by Roman and vivow ported officially by ProtekFZS and Aeroevan) has been up for a week or so over at RootzWiki. I don't see any listed bugs other than a small quirk to get the main camera working, so it may be working. Either give it a shot or ask in the thread - [ROM] Android Open Kang Project - VIVOW Milestone 3 - RootzWiki
The dalvik cache is stored in /data (unless your ROM has moved it to /cache) and factory reset will wipe /cache and /data so it will get dalvik too. So factory reset is the same as wiping cache and data.
And no you don't need to install the milestone first. The milestone is basically a more stable release and the builds are more equivalent to nightlies (or weeklies in this case). The builds are still quite stable as a whole though - they are tested before release anyway. I don't actually have my dinc2 anymore, so I can't speak to how it runs on there but on my Galaxy Nexus it is awesome. Have fun!
question for anyone out there, some of these roms procedures or installion instructions say to format-cache-system-data. and wipe what is the order in which you do this, do you wipe everything first or format first? thanks
Wiping dalvik and then factory resetting/wiping all should be sufficient. If I'm not mistaken, the rom script should format your system for you. A word of warning, though: these roms are not 100% stable on our devices. The camera kind of works, but not really. The ffc does not work = no face unlock. Random garbled text and other graphics issues are abundant. Hotboots are regular. This is by no means a fully working rom. It has come a long way, but there is still a ways left to go.