There is only a select few full games that can be downloaded via Xbox Live. However it is usually cheaper to buy the game on disc from a shop. Then you can install most games to your hard drive which reduces loading times, although you still need the disc to play it.

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Yes, you can install games to a USB stick. Most games are 5-7GB, so you'll need to make sure that your USB stick can accommodate that. Note that the maximum size supported by the Xbox 360 is 32GB. If yours is larger than that, you'll want to partition it first so that there is a 32GB partition. The location of save games is completely independent of where the game data itself is stored.

Blackmagic Ultrastudio Mini Recorder Driver. Remember, you don't have to install a game - if you're running it from the disk, save games can't be written there so in that case they must be saved elsewhere. As @Strike said, if the game doesn't prompt you for what storage device to use when you start it up, you can change that in the options somewhere.

Also note that if you only have one storage device, that prompt won't be shown since there isn't a choice for you to make. Saving to hard-drive (or some other memory device) is not going to be a problem as all Xbox games have an option to select where you want to save to / load from. If you are not asked when you start the game, checking the options menu will reveal that option. Also, I just went and tested if I could install it to a USB-stick and while it told me to select the memory unit, it didn't display the USB-stick as an option.

I could further not copy an installed game from HDD to the USB-stick as the console told me that I'm not allowed to move or copy the selected item. But then again I only used a USB-stick with 512 MB in size, so that could also have been the reason why it didn't work. I suggest you just pick a big enough memory device and just try out if its possible to install to a flash drive, the Xbox will either allow it or not and it's not like that will cause damage to any saves or installed games you already have on the hard disk. If the Xbox doesn't allow it however, than I suggest you go talk to your brother to see what he could delete to make you able to install the game. When all of this fails, a scratched disk should be covered by the guarantee of the store you bought it from.

Advanced Checkers Strategies here. Ask them to provide you a new copy of the game.