In short, yes, the MDR (as well as any other digital recorder that uses hard drives and some sort of software to operate) can crash. However, a crash on one of these machines can usually be remedied just by turning it off and back on (akin to restarting a computer), and anyway they are pretty few and far between...much rarer than computer crashes in my experience. Be aware that it's possible, but I wouldn't worry about it in day-to-day use.
I believe the Apogee units (each one only does conversion one way) that would best suit that job are the AD-16 and DA-16. Each one of those provides 16-channels of 96khz conversion, so you'd need another one or an 8-channel unit to do all 24 tracks at 96khz. Those units cost about $2900 each, and you'd need to also buy the optional digital I/O card for the Mackie to connect them. To both record and playback at 96khz w/ Apogee converters on all channels, expect to invest about another $10000-11000 or so, roughly speaking. Of course there are other companies that make devices like that in different price ranges, but I couldn't name any specific ones w/o taking the time to look them up.
As for the punch-in/punch-out switch...I too would assume that's what that jack does, but I'm not sure...I don't have an actual MDR here to refer to.
About the hard drives...yes, they are standard ATA computer hard drives that you can buy just about anywhere...and if you take the time to put it inside the carrying frame off of one of the Mackie modules, it should work just fine. It's kinda like how you can either buy DTRS formatted 8-mm tapes for the DA-38 premade, or you could buy blank Hi-8 video tapes and have the machine format them for you.
-Frank