"So a 300mm lens still has the magnification of a 300mm lens not a 480mm lens, the image is just cropped like you were using a 480mm lens. You are not actually bringing the object closer. Someone please correct me if I am wrong."
You are correct about Depth of View and Perspective being functions of your physical lens. The crop factor only multiplies the focaln length with regard to Field of View and NOTHING more. There is absolutely zero magnification detail increase done with a "1.5X" crop (or 1.6X crop for entry level Canon DSLR) on the same sensor or film. (i.e. some sensors can resolve more detail or more acuity even if they are smaller/bigger, etc. This is a whole new animal in itself so let us keep the sensor equal in this case for any comparisons)
Quoted from http://www.naturfotograf.com/D2X_rev06.html#top_page
The full-frame Canon, given it is placed in the same distance from the subject as the Nikon and both use lenses with similar focal length, will capture a broader field of view. This results directly from image-forming geometry. Such a setup further gives equal magnification of image detail (not equally obvious to people, but nevertheless true). """
Look for any form of "image magnification" formula on the web or reproduction ratio. You will find out that all of them are functions of physical focal length and distance to the subject. NONE of them talk about the format, because it is 100% irrelevant with regards to magnification.
As quoted from luminous-landscape.com
From Ansel Adams in his classic book The Camera (New York Graphic Society 1980).
"All lenses of the same focal length give images of the same size at any given subject distance."
These are optical laws and facts. Going digital does not change any of these laws.
But wait, so how come the pictures "look bigger"? Good question and the primary source of why people insist it is some magical multiplier.
Ever use a scanner before? You can scan a magazine cover to say "4000x2000" image pixels. You can scan a tiny part of the same magazine cover to the same 4000x2000 image pixels. Do you have "more magnification" now?
It sounds like a problem, but it won't help to use a 600 dpi scanner, because that's not the real issue. The real issue is that scanning a color print simply won't yield more than about 200 dpi of detail. Scanning at 600 dpi will indeed make the image larger, and it may allow your ego to think you're doing better, but realistically, the color print can not yield any more detail over what a 200 dpi scan will give. B&W prints can be a little better, depending on factors like degree of enlargement.
The answer is no. You just have a bigger image of a smaller part of the region. It is not to say there is a big image compromise, it is still very good of course.
The magazine cover analogy is somewhat good because the camera can only see what the lens projects on the sensor or film. Just because you are creating more 'pixels' out of a smaller chunk of the same image does not mean you get more image detail (which is the case of magnification).
But wait, back to the reproduction ratio story, I can print out images far bigger throw the ratio off.
Well that is because the digital realm gives you the flexibility to change the printer resolution easily. Printer resolution is 100% independent of image resolution. I can print out a 100x100 pixel image as a 8x10 inch photograph if I wanted to but the quality will be bad since the pixels per inch will be pretty low.
In the end, remember that a camera's "film" or "sensor" sees an image that is projected by the lens. You are not really getting more magnification unless you modify the optics or the sensor itself does some kind of INTERPOLATION. The camera is not really doing any interpolation in this case. It is not adding any more detail, it is just fitting the same visual data across more pixels (think back to the scanner case).
In this regard it gives you more to work with (more pixels), but it isn't really image detail magnification (it's physically impossible). So it helps your telephoto loosely in that regard.
So does this mean OH NO we got to wait for Full Frame? No, of course not. 35 mm was not the end all either, look at the older, bigger formats. Nikon is a big promoter of the new 1.5X DX format. Look at Bjorn's d2x comparison where he shows it has more detail only because it's sensor is more details, not because it is a smaller sensor.
In the end, if you never shot with 35 mm to begin with, you wouldn't even really know about this "cropped field of view". It is only to compare against 35 mm for old film shooters to compare with and something to standardize on rather than renaming everything. The angle of view is still an absolute value you just calculate it a bit differently.
As this guy mentions
In the end, who cares. Look at the viewfinder, and shoot what you see. It is as simple as that.