In hard settings... the capabilites of the plane, weapons, and radar is quite realistic (we get a lot people asking how to use the sparrow properly in this forums).  What is simplified is the operation.   
  
Hate to tell you the bad news... but targeting a ground target using EO or laser guidance, you just press the magic 'E' button to cycle targets (but it's not "all-knowing" and can only target objects in your field of view).  In more complex sims, you need to manually scan the horizon / radar and lock the target yourself as you have indicated.  Same thing with air targets ('Home').   
  
If you ask me this simplification makes the game more fun as you concentrate on the combat tactics and not get overwhemed by operating the systems. 
 
  
Yes, you can run out of smart bombs ;D.  Ground units also don't go on offensives if they have low supply.  But SF2 is more challenging in terms of supply if you play Mercenaries (where you have to buy each and every missile, bomb, and replacement planes you take to the field). 
  
 
  
Harriers do proper V/STOL with thrust vectoring.  But it's quite tricky to do when fully loaded with bombs.  There is CCIP for more modern planes. 
  
 
  
Helicopters use "cheated" flight models.  AI helicopters will take off as per normal planes (roll along the runway). 
  
We have Tornados and Strike Eagles. Just not upgraded to SF2 standards at the moment. 
  
Finally, I prefer stock than 3rd party anytime.  But adding stuff is fun and addictive.