Hey, look, it's some questions I know the answers to.
1) Why isn't usb_function_switch set to 2 by default?
That's a hack to make it work in Windows. It makes it appear as a single device isntead of composite (so no simultaneous mass storage and adb). When it's set this way, it WON'T work under Linux (or OS X, I believe). Since the main devs tend to be running Linux, the default state is composite interface on, linux friendly. (And closer to how it should actually work. In the future, it'd be nice to have the composite interface working in Windows.)
2) Why can't /system be remounted in rw (read/write) mode?
Squashfs (the filesystem type for system.sqsh... ok, that should be obvious) is a highly compressed, low-overhead read-only file system. That makes it very good for system files, which need to be loaded often, and not take up too much space, but rarely need to be changed. Unfortunately, it means that... they can't be changed.
In order to modify the system files, you have to use a linux machine to unsquash the filesystem, make your changes, and then resquash it.