The roller doesn't actually need to be able to spin...the cable just pulls it straight up and there should be no side to side motion. That said, the pulley on mine does spin if you go and play with it, but its always got tension on it so in normal use it just sort of sits there.
You're absolutely correct about all of this:
I also disassembled mine to get the saddle wires installed and to play with them. There is one thing that has me concerned. The cable has to be cut to a precise length (+/- 1/8") to work with these. If the cable stretches, you not only need to adjust the gizmo, you also need to trim the cable. The benefit of this is a really clean appearance - not cable end dangling out the bottom of the gizmo.
and yes, its kind of a pain in the posterior. The looks are worth it in the end though.
I used regular old brake wire, nothing special and it fit just fine, no modification necessary