I think Cygwin is trying to be an Operating system ontop another operating system. Windows is in C:\Windows, so there is some logic behind Cygwin being in C:\Cygwin. It's not ideal, but I wouldn't call it all together illogical.

The package management is indeed a mass. The install.exe should literally install ONLY the barebones system plus some kind of terminal app, like Putty (because CMD is a pain to use), and then open the terminal to continue installation from there.