1. Yes, there is only one drain on the block. On my M103, and I believe similarly on an M104, there are one or two plugs (bolts with copper or aluminum washers/seals) as mentioned in my first post:
"(located on top, front of the head along side the valve cover on the intake side)". I think they're about between the first and second injector (but tapped into the top surface of the head).

2. When you start your car cold, the thermostat is closed. The water pump is circulating coolant but only on through the block, the closed thermostat keeps it from circulating through the radiator. The underside (block side) of the t'stat has a spring that expands when it gets heated by the increasingly hot coolant (the water sitting in the radiator is still cool) and opens the valve to allow full circulation through the radiator. If there is not enough coolant in the block (or the system) the t'stat may not be getting enough immersion with the hot coolant (on the block side where the spring is) for the spring to react and open the valve properly, or when it needs to.
When you fill the coolant tank, and consequently the radiator, yes, you are filling the block to some extent via the large lower radiator hose. But as the coolant rises in the block above the level of that hose it gets backed up against trapped air at the top of the water jackets in the block, head and the top of the water pump where the t'stat is. That is why the recommendation of opening the air bleeds. There is a tiny orifice in the t'stat that allows some air to vent to the other side of it but it would still eventually run into trapped air at the top of the system. I think in many cases you would be able to fill it as normal, run it and keep topping it off until all the air eventually works it's way out, but I think bleeding the air out as mentioned is the best practice and safest for the engine. I've done it both ways, but being aware of how it works is helpful to determine if you need to bleed it.

3. When cold, as mentioned the water pump circulates coolant through the block only which heats it up and gets the car to proper operating temp quickly. Coolant circulates into the block through the water pump where it is bolted to it and returns to the pump via that real short little hose coming from the head called the bypass hose (I suppose because it bypasses the radiator when cold). Even though there is an open hose between the block and the radiator (the large lower rad hose, not to be confused with the smaller hose that comes from the coolant tank) it can't really mix with that coolant as long as the other end is closed by the t'stat. When the t'stat opens the water pump can then pull hot coolant from the block and send it through the radiator via the top hose and back into the block via the large lower hose after being cooled.
Water circulates through the heater core with the assistance of the little electric auxilliary pump located on the fender well below the coolant tank.

4. Same here, since the oil doesn't want to mix with the water, at least not readily, it tends to adhere to the walls of the system. It particularly likes to stick to plastic and rubber. When it gets to the point where it's just a very light film of cream colored or nearly white residue it will probably-maybe-sort of begin to break down and homogenize somewhat with the coolant after a few months of driving and perhaps be able to be eventually effectively flushed.

I wasn't quite true about my procedure in my last post. Actually what happened was, I found a 92 wagon at the junk yard that had a new Behr radiator in it. It too must have had a head gasket job as there was some slight sludge residue in it! But it was way cleaner than mine which still had blobs of dark gunk in it. So I bought it, and the coolant tank for $50 and installed them as interim parts till the system showed that it was pretty much cleaned out (which it already has). I may put the new radiator and tank in at that time or I may save them for my next Benz.