This has been covered in far more depth elsewhere and as it is 3am again my reply at least will not have that much info.
Still
First things first- there are ways around it but when it comes down to is most 360 hacking tools are less than legit and to save issues with MS they are hosted on a semi private network called xbins. You can join manually but that is annoying when you just want a couple of files so we have autoxbins (
http://www.xbox-scene.com/xbox1data/sep/Ek...pAFGWFFStWd.php - I have not tested this version/link but you can search for another if that falls short).
Regarding your dashlaunch question- no idea. It is not hard to install if it is not though (as of a few versions back it is all in software and no real fiddling with the NAND).
The 360 for the most part does not care where games come from- HDD1 is the same as DVD which is the same as USB in the location names as far as it is concerned. You might have to patch a game on rare occasion (probably using a program called xextool) but most launchers take care of that.
The two big methods for running 360 games on JTAG machines (after running them from discs) are extracted ISO and GOD install. There are variations on both of these and loads of tricks but I will keep it simple for now. No plain iso running here.
For the most part it is all about FTP on the 360. Even if you have a USB drive people still plump for FTP.
You will need an FTP client for this.
http://filezilla-project.org/ or if you prefer not to install anything
http://portableapps.com/apps/internet/filezilla_portable but try others if you want.
The 360 dash itself does not have an FTP client but just about everything else does (especially things like xexmenu and freestyle dash). Assuming you are not using a USB drive just about everything happens on "partition3" (saves, games, XBLA, DLC).
Regarding USB there are two main things-
the May 2010 USB updates- this allows you to make a 16 gig file on a USB drive that the 360 will use for saving and profiles (also data transfer but you have a JTAG 360 with FTP so that is no fun any more)
JTAG style USB- this is a standard USB drive.
ISO2GOD is the main (only?) program used to turn isos into GOD files. You take these GOD files (or more accurate the entire directory structure) and stick them in /partition3/content/0000000000000000/
It makes things a bit complex if you want to apply hacks but for your troubles you usually have an install that works regardless (AP25 was about the only exception) and appears without issue in the main 360 menu.
/partition3/content/0000000000000000/ is also where you stick XBLA, DLC and indie game content.
To save you asking technically the layout is /partition3/content/0000000000000000/// (
http://360.kingla.com/ has a whole bunch of examples)- this means the game has a folder and anything associated with it (usually DLC or addons) has a folder within it so do not worry if your program pops up with existing directory.
There was a custom dash that allowed XBLA from USB called 360 dashit but the big two of xexmenu and FSD do not allow it as far as I know (I have not checked FSD in a while but I imagine they have more pressing issues at the moment).
On the subject of DLC you will usually need to be on the title update from when it was released- 360 games can be patched to fix bugs and what have you.
http://xbuc.net/ has these and filetrip has a few (as an when I have time and can stand the boredom it will have the rest of the big collection I have sitting on my hard drive).
After this you can extract the entire iso file into the files that make it up and stick it on a USB drive or your xbox hard drive. You then launch this with a custom dashboard like xexmenu or freestyle dash. They have preferred directories (GAMES on the root of the drive if memory serves- it is all in the NFO for the programs) but you can just as easily browse to another.
Original xbox games- the 360 lacks the hardware to play original xbox games but it does do a fairly mean line in emulation. 500 gig drive is probably a hacked one so it might not have the emulator onboard. Better yet there is a hacked emulator (be warned there are a few versions so make sure you have the latest one) you can install (it goes on HDDX) that allows unsigned original xbox code and a few other choice hacks. I still suggest you get an original xbox and hack that (far better compatibility- official compatibility lists are not so good and even hacked stuff does not do much better and ultimately an original xbox is considerably less hassle).
You can make them into GOD installs (you will need a newer iso2god to do it or another program the name of which escapes me at this point) but much like the others you can also use one of the old xbox iso programs likw qwix or c- xbox tool.
Plants.vs Zombies is XBLA as far as I am aware- yes
Bulletstorm - I played it yesterday on mine
ACB and Black Ops- assuming you have patched AP25 then yes.
"Also...will PAL Games work on it if it is A NTSC Console And will NTSC Games work on it if it is a PAL Console? "
Region free- it is one of the main perks of this sort of thing. Many games on the 360 are not region locked anyway but JTAG takes care of the few that are.
How to autolaunch- dashlaunch's original mandate was to autolaunch things. Granted it gained a load of other awesome features over the course of things but it still has such abilities (you put an ini file in a given location
Covers- sure. I do not care for such things though (a lot of hassle for the 10 seconds at most it takes to find and press launch) so I am not going to be that much help on that subject. Apparently videos (some low ish res WMV up to a few megs in size) can also happen.