401K rollover to Roth IRA with AGI limit

I have a 401K from a previous employer that I want to convert into a Roth IRA. Unfortunately I am not eligible to contribute based on income limits above 120K. It seems the rules changed in 2010 and allow the conversion, but not contributions without first contributing to another IRA? I need help clarifying the process so here is what I would like to do:

1. Convert old 401K directly into a new Roth IRA (pay tax penalty in 2010)
2. Contribute to my new employers 401K and get the company match.
3. At the end of the year (or after company match is paid), convert 401K to existing Roth (and pay the taxes)
4. Repeat steps 2 and 3 each year going forward.

First, is this even possible and is it the proper way to fund the Roth with an AGI above 120K? Second, how do I go about it? Anyone have an experience with online services (E-Trade, Schwab, etc) that make this kind of thing easy?

Thanks!