Not quite. The point is that the compressive stress around the hole due to the interference fit counteracts the peak tensile stress concentration around the hole.
The "cyclic" stress is just a term for stresses which occur under normal operating conditions, as opposed to the stress when it is sitting in the hangar. The term "cyclic" is usually used when talking about fatigue, which is typically the primary driver for specifying interference fit fasteners. This also explains why the compressive stress around the hole is beneficial, since it reduces tensile stress, which is the cause of most fatigue failures (cracks beginning at holes).
My point about cold working was that the compressive stress has two components, the elastic component, which would go away if the fastener or tool is removed, and the plastic component (due to "cold working") which remains even if the fastener or tool is removed. The plastically deformed circumference of the hole is held in compression because it has "pushed out" the material around the hole, which therefore has a force pushing back in toward the hole circumference. This means you can get some of this benefit by cold working the hole with a tool even is the hole is left open (no fastener).
The strain hardening is not, in my experience, a significant factor in the specification or analysis of the interference fit fastener joint. The strain hardening is not required to "control" the load path as you suggest. Maybe berkshire was making a point with the strain hardening that is beyond me.