I used to think a Chinese selloff of the dollar was one of the scariest things that could possibly happen. And the possibility of it is still pretty scary.
But this action cannot happen in a vacuum. Right now, there are plenty of other factors that dissuade China from such irrational action.
The first is our involvement in Iraq. Contrary to the anti-war strawman set up by some in the media, we are not over there protecting our oil that God left under Iraqi sand. We are protecting China's oil and India's oil, which God left under Iraqi sand. Undermining the dollar could easily be construed to "undermining the war on terra", setting up China and the United States for near-immediate conflict. It just won't happen - the stakes are too high.
Our invasion nullified many of the contracts that China had forged with Saddam regarding oil production. They're just as eager to recoup some of this lost production as we are eager to get the hell out of there.
There are plenty of other cards on the table between our declining empire and China's rising empire. Taiwan, North Korea, piracy (which is only a big deal because of our powerful IP lobbies), the dollar/yuan issues, human rights, etc. are all on the table. Well, maybe except for the human rights thing - China isn't foolish, there are plenty of countries that have joined the global economy under one-party rule.