Above assumptions are valid per ESRI support staff member. My customer has hi-level support with ESRI and they were kind to respond immediately.
FOLLOWING IS TRUE per ESRI:
if there are X Y double/float/ columns, programmatically, I can check for changes and update SQLGeometry::POINT (newX, newy), iWKID) on the feature record and use ESRI API 3.0 to update fdature layer shud take it to the new geometry.
The staff member also indicated that with 10.1, it is possible to store those new edits to a different version for some one else to QA before posting / re-conciling the changes to default version.
regards
ravi.