Getting back to the point
I'm no expert on Japanese...hell I'm not even a Novice
but from my many months (-_-') of experience watching anime and reading mange, it would seem that chan is indeed some sort of 'cute' name for someone. young children are cute (by definition, although I think it might be faulty at some times
). If you call someone chan, it means you care about them or like them a lot (in other words...love them). But not in the parent-child kind of love...(I think calling mom, dad or uncle, aunt, grandma and whatnot chan would be quite...unappropriate. Why I don't really now, just seems to fit with the whole 'respect for your elders' thing they've got going on (Which I have no problems with, by the way...just didnt know how to put it into words otherwise)).
Oh well, enough rambling, hope it helps you.
Oh, btw: Maybe chan could be used as a very degenerative thing (have no idea whether this is the right english term for patronizing someone...). Like you say chan in a way that the sarcasm could almost slap you in the face
. So, more of a teasing thing.