Yes, the Cell is powerful, but you fail to consider that graphics are only one part of what goes into a game. AI, sound, user input, and network operations also need to be considered. Given that, in a normal system architecture, a general purpose CPU handles all of that, and sends off instructions to a specialized GPU, the Cell architecture is radically different from what people are used to. That's what makes it hard.

I sincerely doubt that there are many(if any!) developers programming directly to the Cell processor. They're probably programming to Sony's SDK, which is, reportedly, very difficult to work with.

It depends on how much access the game code has to the OS code, though. Also, you need to remember that the HDD technically standard equipment for the system. It's "optional", as in you can buy a 360 without an HDD, but you need it for all the important stuff.

If it's anything like the way that Windows is for file mounting, it's pretty transparent-all you know is that the drive mount can access data from somewhere.

I'd wager that the 360 OS maps the HDD ISO to the same file mount as the DVD drive normally is whenever a game is started. Since all 360 games at this point did not have the option to install, I'd imagine that they're hard-coded to read from the "DVD drive", which, in the case of an install, would be wherever the ISO is mounted from. This would be pretty transparent from the game code standpoint, so it's probably hard to detect the install.