1.) First off, with the sensor size Nikon uses (the 'DX' format they now call it) the 'magnification factor' is 1.5, not 1.6. I use the quotes because it's not actually magnification. The sensor is 24x16mm instead of the 36x24mm of 35mm film, so only the central say 75% (I made up that number) of what would be projected onto a 35mm negative is recorded. Thus, you get a narrower field of view than normal, the field of view of a lens 1.5x as long as what you're using.
Since it's not actually a magnification, merely a cropping (it's called the 'cropping factor'), it doesn't cause any additional distortions. Actually, image sharpness, distortion, and light falloff are all better than they would be with 35mm as you are utilizing a smaller portion of the glass (quality tends to decrease as you move outward from the center of the lens).
2.) "At what cost"....that's pretty fire and brimstone for ISO200!! Haha. That's the great advantage of digital over film. Noise is practically nonexistent compared to film. I shot a sample to demonstrate with the D100 (which uses the same sensor as the D70). As you can see, until the high ISOs noise isn't an issue. Also, the D70 uses a 2nd generation version of the D100 sensor which is supposed to have slightly less noise.
3.) Rumor mill says beginning of Summer or possibly as early as late March. Don't know how accurate that is.