How cold is 'too cold'? The average temp for QT in Oct is 50. http://www.weatherbase.com/weather/weather.php3?s=92839&refer=

As to your other concerns, I'm also baffled, except that you can fly from DUD to QT.

The weather in Dunedin isn't exactly tropical, either, you know. It might feel just as cool as Queenstown because it's near the coast with some impressive damp winds.

I've done the train part of the Dunedin/Queenstown connection and enjoyed it (good for a rainy day). The scenery is different than in other parts of NZ. I would make sure the full connection is running that time of year since it's off season.

If your main interest is visiting Fiordland & Milford Sound you would be better to stay in Te Anau. Dunedin / Te Anau is 3-1/2 to 4 hours, Te Anau / Milford is 2 hours. It's too far to do as a day trip from Dunedin.
I really think you may have the wrong idea about New Zealand. It's a long skinny country, and doesn't really lend itself to staying in a few lacations and doing day trips from there. You will end up doing a lot of back tracking.
IMO what you should do, and what most visitors do, is to arive at one end (Auckland) and drive the length of the country, sight seeing as you go. Generally 2 nights is enough at any one location, except for the odd few which have enough local attractions to warrent a third night.
Consider a few days in Auckland, vising the far north (Bay of Island), then drive south, staying a couple of nights at perhaps 3 or 4 places. Fly Wellington to Dunedin, and drive to Te Anau/Milford Sound (2 nites), Queenstown (3 nites) West Coast (2 nites), Back to Christchurch for a couple of nites, & fly out.
Don't let thoughts of cold or inclement weather put you off. You may well get miserable weather, we get it all the time, but it isn't confined to any particular area, and you absolutely can't plan your trip around the weather

Thanks for the replies. Jed how cold is too cold? 50 is not bad- I could definitely live with that. All flights-domestic & int'l-are booked. We would pay a ridiculous penalty for changing, so we'll try & work with them. I think it will work. These are our rough plans: 2 or 3 nights in Auckland; 4 or 5 nights near Bay of Islands. Then we fly to Wellington. 2 or 3 nights Wel. then ferry to Picton & drive to Nelson (2 or 3 nights) Back to Wel. for flight to Dunedin. We don't want to do a lot of long drives-we enjoy relying on trains a great deal (usually very relaxing!)We will have rental cars from time to time to make things work. We're leaning toward the train/coach trip to QT - 2 or 3 nights there and back to Dun. From QT will prob take day coach to Milford. We are still flexible, so if any of this sounds awkward or not so doable I welcome any input. This will be our first visit so I am definitely winging it. Whatever goes, I know it will be good.

Think about a backup plan to Napier area/Hawkes Bay instead of the return ferry to Nelson. Just in case the weather is iffy and either one of you are prone to sea sickness. The Cook Strait gets a bit rough.

Distance in the South Island tends to measured by time - not kilometres or miles. The roads can be very narrow and windy. A lot of the bridges are one lane. This makes it difficult to stay in one place.

I've driven from Queenstown to Dunedin and it is quite a reasonable trip - perhaps 4 hours. I strongly recommend renting a car, my only caveat is that the drive up the Remarkables was the scariest thing I've ever done.

I would forget Queenstown given your flight restrictions and just rent a car and drive from Dunedin to Manapouri (for Doubtful Sound cruise) or Te Anau. IMO it's a waste to travel to Queenstown basically just to pick up a coach to Milford Sound when you can do so from Te Anau. We drove Te Anau- Manapouri- Dunedin in one day with no problems at all.