Durzan

Dang Folk Prophet, I think you may have just solved one of my problems inadvertently. 
 
One thing is for sure, the Spirit only gives us information that we are ready to understand, and ready to accept. Failing otherwise, he's just gonna give us warm fuzzies about what we already know... until the time comes that are open to the truth.

Thats one reason why we have ordinances for the dead. Those who weren't eligible or unable to receive the ordinances and covenants in live have the option to do so in death. God wasn't saying that they never would receive the ordinances... He said that from the time of Brigham Young to 1978, it wasn't a good idea for them to be ordained... in this life. No matter how we might think of it, or how unfair it might seem, God ALWAYS has reasons for how and when he does things. He has not chosen to disclose those reasons to us, because it isn't really necessary for us to know. We can speculate on why, but we will not know until He chooses to confide in us. It is quite possible that some of the reasons he restricted the priesthood we couldn't simply comprehend fully in our mortal state.
 
As for speculation... (And this is my personal believe as to what one of those reasons might be.) IF you think about it a certain way: up until the late 1970's, racism was a very big part of the culture within the US, to the point of lynchings and mob violence. Knowing that, how do you think the racists and bigiots (Both within and without the church) would react if African Americans were ordained to the  priesthood before the late 1970's?
 
By 1978, the Civil Rights movement had wound down, and people were just now starting to accept that as the norm of things. The right circumstances which were necessary for Official Declaration 2 had come. African Americans were freed from slavery, and were now on completely equal terms with others, and thus it was much safer for African American church members.
 
How's that for reasoning?
 
 
Now, This also deals with speculation and personal belief. What I express is what I feel is the truth. I cannot speak for the whole church, or for other members.
 
1. Does God worship His Father?
 
I cannot say for sure, but I would imagine so. The word "Worship" has many meanings, one of which is "adoring reverence or regard", which basically means that when we are commanded to worship God, he is simply asking us to honor Him, be respectful, and to love Him. 
 
Another meaning of the word worship, (more of a connotation than an actual definition) is something along the lines of "To imitate" or "to act like"; or in other words, by trying to be like Christ, we are worshipping him.
 
Why am I explaining this? I'm sure you can see it. God worships his Father: He is like His Father, in the sense that He is a divine being. He honors, respects, and loves His Father... just like He loves us., and as we honor and respect our Father.
 
2. Does God live with His Father in the Celestial Kingdom?
 
Extrapolation based off of what we know of Heavenly Father would seem to suggest so, although I cannot say for certain. It could be that He literally lives with our Heavenly Grandfather, or it could be that He lives with His Father figuratively.
 
I would probably guess it would be figuratively.
 
3. "Do you ever feel that introducing all these other Gods detracts from Heavenly Father's glory? I mean, if there are Gods before Him then He's no longer the Almighty, or the Most High, or anything like that."
 
To put it simply, I do not. Heavenly Father's creations are His own. 
 
The easiest way to think about it would be to include the theory of Multiple Universes. Each God has their own set of creations, their universe or universes, with each having their own set of laws that determine how they are governed, set up as its Creator sees fit. In each of these universes their respective God is the Almighty, or Most High, because they were created by that being, and that God governs His universe.
 
So by that logic, Heavenly Father is still the Most High... of our universe, because He is the highest authority in this universe, and therefore to us. We answer to Him.
 
4. "If God has a physical body does He walk around, talk, touch, hug, etc, other people (his wife/wives, spirit children, etc) in Heaven?"
 
Yes, God can walk around and talk, touch, hug, etc. After all, thats what Jesus did, right? He ate food after being resurrected. Since Jesus is like the Father, it stands to reason that he can do so as well. I think He does, if I am to believe what the Scriptures indicate about Him, HOWEVER, I must also point out that he may have other ways of communicating and expressing His love.
 
"Do they have houses?"
 
Well, I did read in the bible that there were many mansions in Heaven, but that could quite easily be a metaphor. I think they may have houses, but I'm not so sure that there is any real need for houses up in Heaven, except maybe as a way for people to show their depictions of beauty or something like that.
 
5. "If there is a chain of God's (eternal regression along with eternal progression) then where did it all begin? Is there a God out there that always was? I think atheism is irrational because it requires an infinite regress of causes in order to explain existence, and to me the LDS conception of God seems to suffer from the same problem. It's 'turtles all the way down'."
 
"Turtles all the way down" is quite literally how I see it. In order to understand it, you also need to understand how we view Time, which has a very similar "issue" as you call it.
 
The easiest way I can think of to describe it would be to quote from one of my favorite book series, The Wheel of Time: "The Wheel of Time turns, and ages come and pass, leaving memories that become legend. Legends fade to myth, and even myth is long forgotten when the Age that gave it birth comes again. In one Age, called the third age by some, an Age yet to come, an age long pass, a wind rose in the Mountains of Mist. The wind was not the beginning. There are neither beginnings or endings to the turning of the Wheel of Time. But it was a beginning."
 
Its kinda like that, except time is linear instead of circular, and nothing is forgotten. (The whole time being circular is based on the fact that history repeats itself anyway...) We believe that we all have existed in some form or another for all of Eternity. Eternity literally means infinity... or no beginning or ending... just one continuous line that stretches onward and onward. There is no "THE beginning" or "THE END", but there are beginnings and endings to many things, such as our mortal life, but there is no beginning or ending to Time. Time is the literal definition of Eternity: Infinite. 
 
Its very hard to wrap your mind around. It makes sense, in theory, but when you try to wrap your mind around it, you just can't comprehend infinity. Our minds just cannot take that implication, so we segment time, and place a mark here, and another mark there, and call one the beginning and the other the end.
 
So likewise is the reason why the phrase "Turtles all the way down" seems so illogical. Our physical minds are programed to see in limits and absolutes. Birth and Death, the beginning, and the end.
 
As far as I am concerned, there are an infinite number of Heavenly Beings and generations of Heavenly Beings, just as time itself is infinite. It seems logical to me, based on my understanding of Eternity. If time is infinite, and God is Endless, why couldn't there be an infinite number of Generations of deity?
 
(tl;dr: Really? Go back and read it, one bite at a time.)