IIRC Lar said the PC and XBox interfaces were fairly different. I don't think the 'no mouse cursor' was a result of there being a console version, but of trying to come up with a movement and combat system that was fairly consistent across a walking slayer and flying dragon. They said they tried a bunch of stuff out, and found that using the keyboard for movement and mouse for camera control worked best.
Stuff you can interact with may be highlighted, or something, when you are close enough and/or facing it. Lack of a mouse cursor would probably tend to limit world interaction, though.
For combat I would guess there is an auto-targeting system (to select the closest opponent directly in front of you), with key or mouse controls to cycle through the available targets, or to select more directly.
In DD I always repaired stuff (when required) myself before trading with merchants, to get the best price. However, after the beginning of the game this became more of a chore than a feature (not tedious, or anything, just not particularly fun if you have a chest filled with damaged equipment).
As for the roleplaying element of whether your character will repair or bring damaged equipment to a trader or blacksmith, it wasn't really that big of a deal in DD or BD. Every so many hours you could either take a time out to go pay someone to repair, or switch skills and click a couple times. It just wasn't required that much to make a big difference in gameplay.
If durability was going to be included it would have to be elaborate enough to justify the extra development resources and calculation time during combat. IMNSHO there would need to be fairly large differences in durability between different weapons, easily breakable weapons that work great on some types of creatures and/or certain creatures that adversely effect certain weapons (a hard shelled creature could damage edged weapons easily, while something that secretes an acidic slime could quickly damage any type of melee weapon).
If durability is not going to influence what weapons you can use in certain situations, then it is kind of a useless stat.