Pauleteeta - you are certainly asking all of the right questions.
Regarding what does failure mean in the context of the VIII-2 fatigue analysis, especially using the smooth-bar curves, it is not entirely clear. And that lack of clarity is nothing inherent in the method, but rather in the data that the curves are based on. Comprising the data is a mix of crack initiation (including a variety of criteria, including: 0.2mm, 0.5mm, and 1.0mm), all the way to Markle data which was leaking cracks. Suffice it to say that the Code Committees have argued this topic long and hard - to no conclusion. Furthermore, the curves generally represent a lower limit to the data, but have a margin of 2 on stress and/or 20 on life, based on the MEAN of the data. And remember that the data mostly comes from smooth, polished laboratory specimens, not as-built pressure vessel components. (Which provides a nice segue into my next topic...)
This is why I have always advocated that the fatigue analysis be used in initial construction to size components in order to generally achieve a desired life. That doesn't mean that you are then absolved from inspection throughout the life of the vessel. Rather, I strongly advocate on using a fracture mechanics approach (using either the method in VIII-3, or API 579-1/ASME FFS-1. Then, you postulate a hypothetical crack, just at the threshold of detectability, and then calculate the number if cycles to a FAD failure or a through-thickness leaking crack. Then, you set your inspection interval (based on the inspection technique and its threshold of detectability) at a fraction of that life. This approach doesn't guarantee any particular life, only that you will detect flaws before they become critical. (Note that the nuclear and subsea industries struggle with this, because they generally cannot inject in-service).
Regarding your first point, about using 5.5.2.2 when the total number if cycles is less than 10^6: the harmful effects of these less-then-ideal fatigue performance details are would carried by methods A & B. And 5.5.2.2 specifically says that those effects must be evaluated. Just a slight detour regarding wording in the Code... When it says that something must be analysed, then the engineer must produce and analysis and results. When it says that something must be evaluated, then some description of calculation must be produced, but it does not necessarily need to be an analysis (such as FEA). If it says that something must be considered, then the engineer is permitted and encouraged to apply engineering judgement that may or may not include an evaluation or an analysis. Make sense?
Method A has extremely low cycle counts, so is feverishly not applicable between 10^3 and 10^6 cycles. Method B may be used, but if you have a combination of pressure and thermal cycles, the current rules may be unconservative, because they consider each cycle type independently. The rules will be changed for the 2019 Edition to apply a Miner's Rule approach to combining these cycles. I have evaluated many components using Method B and find it to be sufficiently robust so as to capture potential issues with harmful details.
To summarize:
- > 10^6 cycles: mandatory full-blown analysis
- < 10^6 cycles, can apply "successful experience" unless poor fatigue details exist, then mandatory evaluation
- < 10^6 cycles, can apply screening Methods A or B with the limitations detailed in the methods. If they pass, then no mandatory analysis is required (the component is exempt from further fatigue analysis)
- Can always perform an analysis to demonstrate acceptability