I was curious if the USB port that is used for firmware update can be used to add custom wallpaper on the SPH-DA100? and if there is anyway to use a pen drive for music/video?

One would think so, but no, it's just for firmware updates. It will also power your android phone if you choose.

Only way you could insert a wallpaper at the moment is through modifying the update file. Would be nice if there were some good WinCE developers who want to have an attack at this side of things.

Pen Drive can only be used for updates, again unless the WinCE side of the device were modified.

It will power the phone, but only to 500ma which would mean it couldn't keep up with a phone with either the screen on or running GPS from the phone. You will also lose the ability to have an iPod / iPhone plugged in to the HU alongside the phone.