The WODE is simply a Wii Optical Emulator Devise. In other words it makes the Wii think that your HDD is a DVD drive. Flat mode is working fine and will play DVD discs - you can set the region as needs dictate if your Wii is 4.1 or lower. Yes back ups work just fine - not sure why you would think that they do not.
So if you have clean ISO's or WBFS of clean ISO games then they will all play no problem from your HDD. If your Wii is 4.1 and lower in firmware then all out of region games will play without and soft modding.
But again the important thing to remember is the the WODE plays 100% 1:1 ISO's. It does not play all patched ISO's nor cISO games. Disc ripping is a feature that will be released in the next few days or so. We are at the last phase of your testing and the WODE will be able to rip directly to your hard drive (not NTFS formatted HDD)
Since I do not know what your WiiKey2 allows you to do I can not answer.
I play nearly every single Wii game that has been released on my WODE without any soft mods. For one game (no idea why this is) it will work fine on 4.2 Wii but gives me problems on a 4.1 Wii. But we are looking at that game to see if there is a bug in our code.
Hope that helps mate.