Why do the Culture need people like Zakalwe anyway?

Plausible deniability. Perhaps also the relative inexperience of Culture citizens in this field of expertise.

It seems immoral to recruit external cultural people to do the dirty work.

The immorality of intervention, especially violent intervention, is a core theme in every M. book, in my experience. This is exhibited by the moniker "Special Circumstances" where the implicit assumption is that you commit a lesser wrong to avoid a greater wrong. These decision points are always worth pondering in an M. book.

The Minds must have known who he really was (hence recruiting him?)

My recollection is fuzzy but that this is explained away at some point in the book as a result of two things: the point at which the Culture comes into his home world is late and post-upheaval and in that conflict the records were lost. As an aside, at some point you have to give an author a bit of flexibility to work his narrative.

2) I dont quite understand the gap between Elethiomel taking Cheradenine's identity and signing up for the war on the Ice planet... why did he need to do that? Guilt?

He's a warrior and it's assumed that he won the civil war. A civilization at peace isn't where you will find Elethiomel.

Did he win the civil war?

He always wins and at any cost. :) It's who he is.

3) What was with the Prologue? Did i totally miss how that was ever linked to the rest of the text?

I forget it, but if you refresh my memory, we can talk it out.