Full disclosure: https://gamedev.stackexchange.com/users/3588/grace-note
In the case you bring up, it appears from most people that many of the edits were actually pretty bad and should never have been accepted. Unfortunately, there isn't much safeguard against that in the system, and there's little comfort for the future can do as far as alleviating the existing damage. All that can be done is to keep an eye out to prevent any future poor edits from getting through.
Assuming that the user is actually making good edits, though, accruing reputation through suggested edits alone, I believe, is entirely acceptable and not cheating the system. It's a legitimate avenue to contribute to the community.
Keep in mind, though, that any such climb is not only slow (+2 per edit is a lot less than the loosely limited potential of post voting), but restricted to a maximum of 1000 reputation. So while they'll get a good start, they won't even be able to earn any of the major privilege capabilities such as full blown editing or close voting. Helpful or otherwise, they'll have to start providing more solid contributions in the form of questions and answers to get any further.
As for the avatar/name issue, dmckee sums it up best in his comment:
My inclination is to frown upon such behavior, but to treat it as non-malicious until it can be shown that the user knows it is frowned upon. Yeah, that probably gives some obnoxious, trolling jerks an undeserved break, but it also avoids landing on the innocently clueless like a ton of rectangular building things.
After some internal discussion, users mimicking actual system accounts (Community, Feeds, etc.) is equivalent to impersonating a moderator or an SE Employee, which is officially disallowed. However, we'll still work on good faith, so unless they're being outwardly malicious in intent, it's something we can just softly advise them to stop doing as they go forwards.