I currently have a carpeted area with hardwood flooring around it. The hardwood flooring is 3/4" thick. I plan to use 1/2" backerboard with 1/4" porcelain tile on that so I am not worried about them being flush. I want to know if i need to put anything between the tile/backerboard and the hardwood. Do i even need grout or maybe I should not use grout between the tile and the hardwood. Help please.

Use the grout caulk that matches your grout. Run it around the perimeter (one tube should get you 15-20 linear feet). It is more flexible than grout by itself.

Now my love for wood has to come out. Why not fill with wood?

We could; but, in our family room, it would look funny. The rest of the floor all around is all wood. When they put this in they ran a 4 board wide ring of oak flooring with the carpet in the middle. We think that it would be better to replace the carpet with porcelain tile.