Quite a few NAS devices, including those by other makers, won’t do transcoding. If you must have transcoding either buy a NAS that supports it (like the WD PR Series) or build a seperate Plex Media Server using a computer (like an unused laptop/desktop) that has the processing power to transcode.
Take a look at Plex’s own NAS doc that indicates quite a few NAS devices don’t officially support transcoding: View Plex NAS Compatibility Guide
Plex can be installed to both the first gen and second gen single bay My Cloud but it involves using SSH to hack the firmware. Whether it runs/works (at all) is another story.
First gen (v4.x firmware): Using Plex Media Server with My Cloud - #13 by hvalentim and Clean OS (Debian), OpenMediaVault and other "firmwares"
Second Gen (v2.x firmware): WD MyCloud Gen2 - Enable apps install tab + Apps!
Not sure where you get the idea that a Plex server running on another device on the same local network as the My Cloud cannot access the My Cloud as a media library (if I understand question 3 right). I run a Plex Media Server on a Raspberry Pi and use the single bay My Cloud as a media library. In the Pi’s case I have to mount the My Cloud Shares then point the PMS to the mounted Shares on the Pi. For Windows that was running a PMS, I mapped the Shares then pointed the PMS at it.
I find that I don’t really need to transcode the media as I try to keep it all in MP4 format. Once in a blue moon I run across a MP4 file that was encoded differently. Run the media file through Handbrake and problem solved (no need to transcode).
The main advantage of Plex over Twonky is the on screen user interface and the scraping of the data/cover art for movies and TV shows. There are other advantages to Plex but that’s the major one outside of transcoding if you have a PMS server that has the proper hardware to do transcoding.
