tuglaw,
...glad you found your problem.
Here are my best attempts at answers.
1. I've never acutally had a wiring issue with my bike. (I cut those zip-ties when the bike was nearly new) So, others might be able to tell you what they used to repair the outer sheath. From other wiring experiences... I absolutely hate the first choice you give. I call it "split-loom". Man, I hate split-loom. Personally, I would choose some kind of waterproof tape. I don't have any experience with the particular product "magic wrap", so I can't give any reccommedation on it. But, I would use something similar. Unwrapping tape isn't too hard to do if you need to access the wires again.
2. Yes... many, many people have had broken wires. Almost all of the broken wires were precisely where those red arrows are in the picture above. Turn signals, kills switch, starter button, heated hand grips, brake light ...
What happened to the starter wire, could certainly have happened to the other wires. Hopefully, the other wires are intact...and now...will cause you no problems. It is not really possible for me to predict, as there may be some partially damgaed wires. I would play/inspect with the wires in those areas before sealing up the the sheath. Then you should have some reasonable confidence in them.
Sometimes, the wire for the heated grip (inside the handlebar!) will fall off the grip (this is a throttle side problem). Fully opening and closing the throttle, and the factory not providing enough slack are what cause this to happen. It can be prevented by assuring enough slack is available for full throttle movement. Pull off the throttle side bar end, and look inside the handle bar to see the wire.
A couple of people have had the big harness, underneath the tank, rub and eventually make contact with the tank and necessitate a replacement of the whole harness ($$$). This occurence is Very Rare. Make sure that the harnesses have room and do not rub on the underside tank. An inspection, should give you good confidence that this is not an issue for your bike.
3. Other preventative measures...
A. Replace the stock plastic fuel disconnects. I really reccommmend this! Way too many people have suffered fuel leaks due to those stupid plastic pieces.
These are nice! They are exactly the same thing as the stock plastic disconnects...but metal.
http://www.beemerboneyard.com/cpcqkdiscon.html
When I replaced the disconnects, I replaced all of the hose and hose clamps (8) at the same time. The kit above does not include enough clamps (or any hose) to do that. You must use proper hose and clamps for high pressure fuel injection systems. The worm gear clamps will not do!
You will find an enormous amount of info about this if you type "quick disconnects" into the search box at the top. Then dig through those hundreds of threads to find out more than you want to know.
B. I also reccommend...DO NOT NEGLECT THE CLUTCH FLUID! If the fluid is nasty, I would replace the slave. Then, I would start changing the clutch fluid annually. This is just me. I ain't gonna suffer a blown slave out on the road. My clutch fluid has always been Beautiful!
...And it always will be.
4. I have just let the wiring harnesses hang, since cutting the zip-ties. I am very comfortable with the way they hang. Others have restrained them much less tightly or with things like velcro straps. The most important thing is cut the stock ties. They were way too tight...and obviously damaging to the wiring.
I hope that got all the questions.
I was dreaming when I wrote this, forgive me if it goes astray...
The fuel pump is powering up/cycling, the lights come on, everything seems fine, but the switch isn't getting the starter to do its thing. There is no clicking and the battery was on the battery tender, so I don't think it's a battery issue. Pretty sure it isn't a side stand kill switch issue as the bike would still turn over if the wiring on that was shorting out (I think). Note, on my last trip I noticed a couple of times that the button wouldn't work on the first try when I'd try to start her. I thought it just might be the contact, so hit the button/switch with a little contact cleaner when I got back. That seemed to fix it, but now I'm not so sure. Obviously something was getting ready to go. The bike has 30,000 miles on it. Is the start button bad? Is this a button/starter relay issue? Could this be a starter issue? I've never had to troubleshoot something like this and I'm not electrically well versed. Any thoughts on this? 
