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Since not all your items require an answer I suppose the following does:

Answer to Q5 - Grub always to to either /boot or /boot/grub subdirectory to look for its system files. Putting the system files in a place of your own choice will not work. Your menu.lst is flawed as it does not have a root statement telling which device it has to boot from.

Similarly for a Linux distro working as a Live CD its installer has been written to go back to a certain directory to fetch the files during the booting up stage. Therefore if you move Tiny Core Linux to a USB jump drive you should keep its original subdirectory system intact.

Answer to Q6 - Grub1 is quite simple and has two parts The stage1 is 512 byte long for installing into the MBR. The main intelligence is stage2. When you install Grub in the MBR it will "hard code" the hard disk address of its stage2.

In the simplest form Satge1 loads the stage2 and you get a Grub prompt. However if there is a menu.lst created, say using any editor like Notepad, gedit, nano, vi, Vim etc, Grub will execute it. Therefore you could do a bit of playing around in addition to booting systems.

Does the above answer your queries?