Display Taxonomy Field vs Default Taxonomy text w/out New modules
Ok... so following all of the steps above, I was able to cobble together what I wanted.

In template.php I have a custom function:

THEMENAME_field__CONTENT_TYPE($variables)


Inside this function, I check for $variables['element']['#field_name'] in a switch statement. IF the switch statement equals the field that has the taxonomy reference (i.e., 'field_faction_affiliation') then I do the following:

case 'field_faction_affiliation':
    $base_path = base_path();
    $faction_icon_href = $base_path . $variables['element'][0]['#href'];
    $faction_icon_title = $variables['element'][0]['#title'];
    $faction_icon_url = file_create_url($variables['element']['#object']-&gt;field_faction_affiliation['und'][0]['taxonomy_term']-&gt;field_faction_icon['und'][0]['uri']);
    $output = "&lt;a href='$faction_icon_href'&gt;&lt;img alt='$faction_icon_title' class='faction_thumb' src='$faction_icon_url' /&gt;&lt;/a&gt;";
    return $output;
    break;


I'm almost 100% certain that the base_path hobble I did is NOT drupal 'Best Practices' so if anyone has a suggestion for correcting that, please let me know. Otherwise. This is how I got what I wanted.