Looks like we're out of the frying pan...*puts on shades*...and into the fire.
YEEAAAHHHH!
Meatloaf ftw.
Why wouldn't they? Most people trust ShinRa.
It's not like anyone investigated the aftermath of the sectopr 7 fall, is it?
Officially no, but then again it did inflate the motive of Avalanche's revolutionary efforts which ultimately lead to the crippling of Midgar and Shinra anyway, so even without investigative suspicions, they still had plenty to be wary of. It's safer to cover it up than to simply leave it as it was, because even if an investigation was silenced, revolution against Shinra could have begun much earlier.
With Cosmo Canyon a stone's throw away, I'd bet you could find a good lead investigator there. They would probably start by hiring a few excavators from Bone Village
I expect Bugenhagen knew the truth immediately.
I dunno. To me it just seemed like they tried to fake everyone else who didn't matter, and those who had connections to the main characters were just dead, ala Cloud's mom, Tifa's dad, Zangan... although we see Tifa's dad die and she witnessed it, it would prove to be a very entertaining mindfuck for her to come across 'him' again.
iirc, Zangan survived. Also, immediately after the incident, Cloud and Zack were taken to Shinra Mansion to be experimented on. As far as Hojo and Shinra were concerned, Cloud would never see his mother again anyway. He was a failed experiment as Hojo called him, no one at Shinra had ever contemplated the possibility of Cloud (or Zack) ever escaping captivity. Thus with Cloud out of the picture, the imitation of his mother's existence was unnecessary, but as Mako Eyes pointed out, it's not like Shinra was concerned with taking their elaborate cover up to such an extreme degree. It just had to look like a normal, undisturbed town from a distance. This way they only had to worry about those who got too close or nosy.