I just want to make sure I'm reading your questions right in this post. You're wanting to know the best way to turn a profit off a flip? I think this is the gist of the questions above...
I would start by learning the laws in your state and learning them WELL. The scenario you described in your second list "Flipping Short sales process" above, if I'm reading it correctly, is currently being prosecuted in California & Arizona (to start with) as loan fraud. Yep, Loan FRAUD, people are going to jail for this one. There are quite a few things in your post above that can get you into quite a bit of trouble... at least in the state of Arizona.
For the quick response here, I would suggest you get your real estate license in the state you're located and join up with a broker to learn everything you can. It will maximize your future profits and keep you ass out of jail. Hopefully. As with any other business out there, start working for someone successful in that business. For free if you have to. The information will be invaluable & you'll learn first hand what works and what doesn't.
One thing to keep in mind in this business, just because "everyone's doing it" doesn't necessarily mean its legal. Do your homework, cover your ass & make sure you educate yourself. This business can be high risk but it's also high reward potential (one of the reasons I love it). Someone with the combination of a heart to serve people & business savvy can make quite a living. And there's no time like the present to cannonball into the pool & start making waves.