There are several threads on here that explain how to get the licence and mixed reports on converting them. Iv just gone through the process so I thought i would let everyone else know.

To get the licence in raro you need to either present a valid overseas motorbike licence (even learners) to get straight to a full cook island licence. 1 year = $20 , 5 years = $50. Note for the one year licence, it will expire the day before your next birthday, so it will probably be valid for less than a year.
If you have no bike licence you have to do the test which involves riding round the block (the route is displayed on a poster). Basic common sense and not falling off will get your though it.
If you have no licence of any sort you will have to do their written test (road code costs $15) Its very basic but there are some specific things you need to know from the code. (My friend had to do this).

For those of you who are wondering it costs around $1000 - $1200 for the cheapest flight and accomodation packages for 5 or so nights.

Once you get back into NZ you can use it for 1 year from re-entry or until it expires which ever happens first.
I was able to get insurance on it. I was told " If you legally able to ride on the licence we will insure you". If this is actually true im not sure. Im sure they would try and wriggle their way out of it if I tried to claim. You will also pay through the nose (depending on age and record).
I wasnt pulled over while riding on the licence. How each cop acts depends on the cop themselves, but if you explain your legally in the right you should be ok. (unless of course you were doing something else wrong)

Converting to NZ full licence. You can convert the cook Islands licence to a NZ full licence at any time (even before two years are up). You need to go into an AA or VTNZ and fill out the converting a licence form.
If you havnt held the Cook Islands licence for 2 years you will be required to sit the NZ full licence test. If you have no motorbike licence and you try and convert you will need to do the full licence practical test and the learners theory test.

There may be some resistance on the staff members part on letting you do this, it took 2 staff 15 mins to try and get this sorted but it is legally what you are allowed to do. If they say no point out that on the front of the form it states if you have had it less than 2 years, you are required to do the practical test.
Im currently on my restricted and was told that when doing the full licence test I will have to adhere to the conditions of my NZ licence (250 or under).
I think this is because in their eyes the full licence from the Cook Islands has allowed to skip the restricted period (or whats left of it).

Than all thats left is to sit the full licence test and pass.

Hope that has helped out any of you looking into this or wondering about it.
This was just my experience (sorry if I got any of it wrong)