1) No you cannot just turn it on and read books. You have to do an initial setup. Either through a computer or via wifi. However once you are setup that is it.
You are NOT tied to the Kobo store, you can shop anywhere that sells epubs or PDFs (I do not recommend PDFs if you can at all help it). Mobi files can be converted to epub via Calibre.
Ahh social networking, where you have a million "friends" who don't really give a damn if you have to go take a sh!t and have to blog about it afterwards or even during... Yes there is some facebook integration, no twitter or myspace. However it can easily be ignored just don't fill in the "sign in" area under Settings -> Account -> Facebook account. If it wasn't I wouldn't even bother with a Kobo period. No Cloud storage although I understand Dropbox can be setup and used with the Kobo.
You do need Adobe Digital Editions if you are buying books with DRM. DRM can be later removed but you do need ADE initially.
2) Micro SD cards are usuable. Mileage will vary as the Kobos can be finicky with brands and/or size of card. Sandisk cards seem to be alright, currently, I have a 16G in mine with no troubles.
Card must be filled separately as far as I know. Personally I store all my books on the SD card, just makes things easier for me.
3) Yes, functions just like a usb stick. If there is a SD card in the Kobo it will show up as a separate drive from the Kobo itself.
4) It does support multiple bookmarks with notes.
Working on all formats, of that I am not sure.
Annotations work, not sure on exporting the annotations but I believe Calibre can do this. I don't use Calibre much so can't say this positively.
5) Display is like the Right image (B/W, indexed)
Like any device the firmware has some bugs, 2.3.1 has a bug where paging and starting a new chapter makes the font very tiny. Seems to be related to sideloaded epubs. Apparently fixed in the Japanese release v2.3.2 which has not been released to the Americas as far I know. Does not always return to the page you were reading before you put it to sleep/turned off. Instead it may go back a page or 2 when woken up or turned on. Tracked down to margin size on sideloaded epubs. Workaround is to set margin size on reader to zero. I don't like it at zero so I tolerate this bug.
More info can be found on the Kobo part on this forum.
All in all I really like my Glo despite the bugs. I've had the Kobo Wifi, then a Touch and now a Glo. I've liked each one. If you get a Glo I highly recommend the Sleep cover. Not so much that it puts the Kobo to sleep when you close the cover but I find the covers are quite nice with the elastic band to keep the cover closed.