You have asked several questions at once so a little difficult to give you the answers you want.
First, Hardy backer board is a newer, lighter, substitute for concrete board and usually used in bathrooms and under tile installations. I have never seen it used on exterior walls as a sheathing.
Second, the huberZip system is from Advantec. I love Advantec sheathing and subflooring. I'm sure it does what it says, but it is pricey compared to OSB sheathing and tyvec. Selecting a product because of price is not what we do here. An OSB, or any T&G exterior sheathing with properly installed and taped Tyvec or a house brand wrap also works very well.
Third, a true vapor barrier is installed on the heated side of the wall studs, not under or over the exterior sheathing. the wall cavities and insulation must have a a way to breath. They will breath and excessive moisture should escape through the exterior siding. Tyvec is not a vapor barrier, it is an air penetration barrier, just like the new Zip system. they both stop liquid water infiltration, but water vapor is a different story, it must be able to pass through. On wet, foggy or very humid days, humidity gets into the wall cavity, the vapor barrier keeps it out of the living space. When the weather conditions are better, the moisture migrates out of the wall cavity through the siding, thus drying the wall.
I hope this has answered some of your questions. Good luck on your project.
I REALLY don't like doing things twice ...
This might indicate it is not a DIY project for you. However, if you are willing to do a few bits and pieces twice, you might be able to master the work well enough for a permanent result.
I also hate paying 3-4x more for someone else to do it.
This is often the best motivator, and hopefully provides some perspective. If you end up spending 20% more than a perfectly executed DIY, you are still way ahead.
1, should I do it (hardy) or the cedar
Dunno without seeing it. My house is brick on one face (the north side, oddly) and cedar shingles on the other sides. As long as the finished product looks like it is supposed to be that way, it should be fine. Have you thought about planting shade trees on the south side?
As far as redoing the siding's cladding/sheathing, you probably won't know until after tearing off the siding. It could be that part was well done. I don't think it needs exterior rating because it should be well protected and never in contact with moisture. 1/2 inch plywood or chipboard is standard, but thicker won't hurt and will help a bit with sound insulation and overall durability.
As far as house wrap, brace yourself: it is surprisingly expensive (maybe $100 for one side). If airflow through the wall is a significant factor, like all the other walls are tight and this wall is the big leaker, then it is worth it. If all the other walls and windows leak significantly, then don't bother unless you plan to eventually seal them all.
You might also consider adding additional insulation while that is open, both inside the wall cavity and perhaps as another layer on the outside. This might cost thousands, but given the high price of electricity there and typical air conditioning use, it probably will pay for itself in 8–15 years, as well as being a big improvement in comfort.
If you are going to replace windows, it will be way easier with the siding off than at any other time. The flanges are screwed into the cladding from outside. 14 years isn't all that old of a window, and a straight replacement isn't likely to save much. However, an upgraded replacement could well save on energy costs. Again the pay-for-itself period is probably in the 8–15 year range. Get an energy audit from your local utility (usually free) to learn more.
Best Answer
I've worked in the asbestos regulation industry for years and I can tell you that it's easy to go overboard with hysteria and fear. As the homeowner, you're entitled (within limits) to do what you want with your asbestos as long as you don't endanger others by causing an air pollution hazard or waste disposal issue.
That being said, carefully grinding a hole through a few asbestos shingles is not going to be problem if you contain dust within a simple plastic enclosure, or a stream of water. Pretend you're working in an archaeology museum and you MUST keep dust to an absolute minimum. After that, just bag your material and throw it out with your regular waste. You are entitled to certain minimums after which you must treat these materials like hazwaste.
Check with local municipal regs beforehand. They're likely on a website.