agile manifesto

It was probably in Dr. Dobb's Journal that I first became aware of the "Agile Manifesto" and I found the ideas very appealing and natural.  However, ten years later, still at step zero with our development team "getting ready to take classes" -- so we'll see how it goes.  At this point, I'm wondering how well Agile has panned out, and is it appropriate for our project.

Agile Manifesto reads, in its entirety, as follows:

We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value:

Individuals and interactions over processes and tools

Working software over comprehensive documentation

Customer collaboration over contract negotiation

Responding to change over following a plan

That is, while there is value in the items on the right, we value the items on the left more.

So how does eschewing processes fit with our CMMI endeavors?
"following a plan" also very ingrained in government contracting....often "comprehensive documentation", as well.

From the Agile software development class ("Agile Programming and Testing"):

Simple Design:  only doing what is required now.  How do you avoid being trapped in a local minimum, evolutionary dead-end, or painted into a corner?  If you are, how do you get out?  Mixed with pair-programming, is there an architect?  How do you get from A to C if A is refactored into X such that A-B-C is no longer viable or X has relaxed constraints that made C possible.

Do tests get retired?  If a test fails, can you remove it?  Too easy/simple to test: Will you have a lot of no-value-added-tests to maintain?

Managing ("Managing Agile software Development")

Since any method would probably work with the perfect team, how perfect of a team is necessary for agile to work?  (Is it only suitable for a small team of experts?)
Is there a threshold below which an imperfect a team is hurt more by agile?

Our project: the PPT links to an XLS that links to a CACI document about suitability.

VS2010: no experts now?

Physical co-location required?