"Developing markets" don't buy $400 phones, they buy $20 phones. A smart phone without storage is a dumb idea.
Right, which is why Apple keeps emphasizing China as the market they need to increase their efforts in....
There are a lot of people, and a lot of rich people in non-Western markets. Apple realizes that is the next big growth vector for them.
TV behaves. They'll call it "magic play" and will send their full store version for songs you've purchased, your version for other songs you've uploaded to iCloud, and their full store version matches to your Library for those paying for iTunes Match.