In fact you can but with only a benq drive.
Yes u can my friends and I have installed gta mods onto it. same principle as old xbox but it's a lot harder to take apart with all the built in wi fi and touch sensitive buttons.
hotswap
yes
No, that will not work at all. You need several different programs and a Flashed, JTAG'd, or Hotswap Xbox 360.
An xbox arcade IS an xbox 360, just without the hard drive.
You can play any online game without Xbox live.
NOOBS
Duct tape it shut.
There's no point? The Xbox 360 will play any DVD without anything but a controller or a xbox 360 remote
no
download the updates from the official xbox 360 website then burn them on to a data disc then put the disc into your xbox 360 and install the updates.
The Xbox Arcade is an Xbox 360 and it comes without a hard drive. What you are calling an Xbox 360 I'm assuming comes with a hard drive and if you are thinking of buying an Xbox I recommend not buying the arcade as you cannot save games without a hard drive.
Yes, the kinect can work with or without Xbox live.