Hi Clive
First - are you buiding the Billings CA 414? That's the larger of the two CA kits that Billings offer. If so then I may be able to help, or at least pass on my experiences. I've just started building that version myself.
I'd agree totally with your general comments, particularly regarding the instructions or lack thereof! However in Billings' defence, they do indicate that the kit is for experienced builders. Nevertheless an awful lot is down to guesswork or personal preference. I have the advantage of having built the Billings Karoline, for which the instructions are just as limited.
As I understand it, you are intended to cut the hull moulding along the roove which you've already identified. I don't have my hull or the plans/instructions here ATM but if piece(s) 8 are the ply gunwale strips then they will fit OK with a bit of help. They just about fill the space above the moulding-in doubling strake at the top of the moulding. My trim wasn't very neat, so rather than leaving the hull proud of the ply by the thickness of the sub deck, after gluing in the pieces 8 and cross beams, I trimmed the moulding flush and will carry the subdeck right out to the edge of the hull moulding. I hope that makes sense
Again IIRC the scrap sketch which you mention, with the 5mm measuement, indicates that you should leave the bow and stern post mouldings 5mm higher than the rest of the hull. If you look at the bow and stern post ply stiffening pieces, you'll see that they have a step in them matching this.
The other thing I took a while to work out was whether the keel stiffening piece should be sit horizontally or be glued down into the keel of the hull. The answer is the second but it was some time before I spotted the sketch which showed that clearly.
HTH
Guy