Some original xbox queries

[Inferno.]

I got my XBOX component cables for £6 each off eBay. They really do make all the difference if you're using an LCD and don't have access to a CRT, since the XBOX is a much more powerful system than the PS2 the component leads actually make a difference on an XBOX.

Too tired to write a detailed response to all your questions so I'll just write key points you can google for more info.

Hot swapping is possible yes, google for a hot swap tutorial.
If the hard drive dies you are screwed, because the hard drive stores the eeprom, and if you lose that or the HDD dies your XBOX is a massive door stop.
Google for the XBOX hard drive compatibility chart, there are loads of compatible drives, as long as it's IDE it should work though. Hell, even SATA drives are compatible with converters and the like, again Google.

The original XBOX didn't have media checks and stuff like the PS2 games do, so you can remove, modify, tamper with as much as you like with XBOX games and they'll still play, whereas the PS2 the games had to be 1:1 or been modified to load properly. You can remove anything you like on an XBOX game and as long as you patch the XBE it'll still load (within reason, depending on what you stripped) as for multi game discs, same applies, the checks on the original XBOX were very lacking.