The primary argument for EWR to come in from the south is to continue on to Ipswich as a through service. Services terminating at Cambridge aren't going to go down very well with the eastern section folk who have been campaigning for the line for decades, so I'm not sure how relevant the bays are to EWR. Presumably their existing conflicts are part of the reason for running services through to Cambridge North now?
(Apologies in advance if my information is somewhat out of date, I haven't been through Cambs for quite some time), but yes, the bays at Cambs used by the 8-car terminating services are unfortunately off to one side. Presumably given sufficient new through platforms they could be abolished, though, with terminating services using the central through platforms effectively as double-ended terminal platforms. No conflicts then. North of the station everything merges into 2 tracks anyway, so no conflicts there, and you only need a smaller single-track flyover at SBJ as well. Not sure how many platforms you would need at Cambridge station for that sort of arrangement though.
I recall when I used to commute through there musing if you could jack the listed building up and shift it away from the railway enough to convert the bays into through lines
I doubt it would fare well given its age, but stranger things have happened at sea.
Having UDUD means you will get passengers at Cambridge South having to change platforms at short notice as their next train could depart from one of two platforms, so unless you designing it so they're waiting on an overbridge or being very strict with the timetabling so the same services always call at the same platforms, you will get all sorts of undesirable flows as people move between platforms trying to speed up their journeys.