How easy to setup WP as CMS?

You have a lot of requirements… some of them can be done easily, others – well, not so easily 🙂
First level Page highlighting is built-in but with children it gets more complicated.
There are all kind of plugins (search the Codex: http://codex.wordpress.org/Plugins) and this forum for different menu options (folded page menu, folded whatever).

Of course, if the site is really “static” you can use a third party script and handcode the links, what I said above is about using the WP template tags to generate menu list items.

Generally, it is not very easy (is there anything that is?) but with a fair understanding of the WP mechanism it can be done. The task itself to use WP as a CMS is not that complicated. However, when you want to add all kind of “fancy” stuff for navigation, menu highlighting… then it gets painful sometimes.

You can use pages and child pages to set this up (assuming I’m reading it right). For your page navigation you can use this to only display the first set of parent pages:

<?php wp_list_pages(‘title_li=&depth=1’ ); ?>

Then in your page template, you can list child pages for that page like so:

<?php if ($subpages = wp_list_pages(‘title_li=&depth=1&echo=0&child_of=’.$post->ID)) : ?>
<h1>Subpages</h1>

<?php echo $subpages; ?>

<?php endif; ?>

vincentrich, your question is totally un-related to the OP, and no, you cannot do anything about it: have to learn to live without .html extension for Pages.