Is this right? Larger CCDs produce better images in lower light. How much though, and do larger chips improve anything else?

Larger chips "improve" DoF (Depth of Field). The bigger the chips, the shorter the Depth Of Field you can get which improves part of that illusion of the "film look".

That said, 1/3 and 1/4" chips all have a large DoF compared to something like a 35mm plane.

Cheers
Aaron

Larger chips generally mean larger pixels, which mean more photons can strike each photo site (pixel). This doesn't always mean better low light capability, but it can help.