1. I haven't seen any hard numbers to support there being any visible performance difference between symbolic links (junction points, etc.) and single directories. [edit] There used to be a problem with certain files getting overwritten but ISB does config file virtualization now which overcomes this from what I've read.
2. A 5-man group is easily boxable up through all 5-man and some 10-man raid content, though you'll need to outgear the 10-man stuff and have an honest tank/healer setup to be very effective at it.
3. ISBoxer has been well received by those who use the extra features it provides over the other tools. I have yet to hear of anyone being banned for using it and it has been out for quite a while now. The only consideration is that, if you use the rendering feature that causes WoW to render the full window size while being shrunk to fit on your desktop, you will need more CPU/GPU horsepower than with the other solutions. If the mouse cursor broadcast and instant PIP features are critical to you, then there isn't much in the way of alternatives.
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