To be clear: We are not aiming for 100% compatibility. We don't expect the majority of demos to run correctly, for example. However, it is important that at least the majority of games run well on it, since we know that this is a lot of how the machine will be used and judged.
Yes, there is a risk people will only ever use it as a nicer C64, and that is up to them. I don't worry about it too much.
The C128 mode problem is actually quite different: You couldn't use all the C128 features from C64 mode, so software ended up basically using just C64 mode, and perhaps 2MHz mode in the vertical blank period. The C65 approach is different: You can access all the extra stuff from C64 mode, so it is much easier to ease across to writing software that uses some nice extra feature, and then another etc.