1) Yes. Windows can't keep it's mitts off of things running on the same drive that it runs on.

2) I had a significant performance increase when I went to multiple, symlinked, folders. Aside from the performance, on patch day I update one WoW folder and copy/paste to update the rest and I have one set of addons to update.

3) I used to use Windows affinity for this but I am a lot more please with the flexibility of doing it with Keyclone. I don't know how it changes performance.

My system is one step down from yours in all respects and I never lag in cities (outside of server lag). I have raided with 8 WoW's in Kara and ZA on my one machine.

edit: one thing to note. my separate drive for WoW is actually 2 drives connected via RAID0.