Hi Graham,
The primary instruction in Hakkoryu is in the formal Kata. This is how the art is passed on and what we put ourselves up against in our attempt to master the teachings of the ryu.
Yet, there are other dimensions in Hakkoryu training which can vary from dojo to dojo. Many Hakkoryu schools practice what we call "henka" or variations of the techniques shown in the foundational kata.
The Hakkoryu.com website states:
It is through this process of extracting and internalizing the principles and themes contained within the individual techniques and then applying them to a variety of situations that we might create "thousands of techniques".As with all Japanese bugei/budo Kata, they may be considered “ideal models for teaching.” In Hakkoryu, their purpose is to clearly teach our principles (Gensoku), not to provide the best solution for any given self-defense situation. Once the Kata are mastered and our principles understood, they may be adapted for use in myriad practical situations. Such variations from Kihon Waza we call “Henka.”
In regards to your second question, yes, the student begins by learning the techniques and principles of the Shodan kata, and only when they have shown the required competence and understanding of those teachings are they introduced to the Nidan waza.