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.
Your 2# regulator is likely dropping the pressure down to about 1/4 psi which is what most appliances need. By putting the tee after the regulator and running a 80ft line isn't going to be sufficient. Longer runs generally need larger piping. Your 1/2in line wont be able to keep up. You probably should have ran the 2psi line (i.e. a tee before the regulator) and installed a 2nd regulator up there.
Here in the United States, most houses are fed 1/4psi after the meter and if there is problems with piping or a need for large appliances, generally pressure can be increased to 2PSI. Since you have 1/2" gas piping, that might explain why you have 2 PSI of gas. On my house, the line coming in is 1-1/4".
Best Answer
If you have threaded iron gas pipe coming into the house, expect a MUCH MUCH larger job that it looks like if you do that - you have to start at the loose end of that pipe and back every joint out, one at a time, until you get to the siding.
The typical way of handling that situation with solid siding (clapboards, shakes, etc) is to cut a notch in the siding below the pipe hole, fit that notch around the pipe, and backfill the notch with the cut-out piece and glue/silicone.
If vinyl siding, don't remove a whole notch, just slit the siding below the pipe hole, twist to fit around the pipe, then slip another smallish scrap of siding in from behind (silicone optional) to hold the slit closed. It helps a LOT if the slit isn't dead centered on the pipe hole, but rather at either horizontal edge of the hole.
By all means, leave that pipe right where it is.