I'll chime in as the poor bastard who will quite likely code it all
I like the idea of HN having their own flag, and spawning units which look like what might be HN naturally in the current game. There are numerous ways to approach this: Spawn units which hold randomly selected racial promotions. Spawn units and then choose a random city and run the "I just built a unit" routine based on that city (so assign that Civ's Race and that city's free promotions, also use that city's Unique Unit replacement if there is one). Spawn duplicates of units already in the game with HN on them.
Having some HN units appear as one Barbarian faction while others appear as a different one can lead to serious complications. Primarily in deciding how to handle it when your HN bear wants to attack a Doviello worker, while the Doviello are at peace with Cernnunos... Do you get to surprise him, or should you not be allowed to be hostile, or should he see through your clever rouse?
I also love the idea of them doing economical damage more than military damage. To avoid making up new mechanics, I would lean toward adding a CityBonus effect to HN which causes it to leech cash, culture and other tidbits from nearby cities. In fact, I would say to make it allow these units to spawn absolutely anywhere (even owned territory), but they don't pillage and only attack units if they have better than 98% chances to win. Then their primary goal will just be to fill tiles with hostile units who camp out and make them unworkable, while picking off unguarded workers/settlers and being annoying with their CityBonus. Maybe once they have built up a stack of a certain size THEN allow them to attack (would also look more like a human that way, picking off easy targets and waiting to build up a solid strike force)
Hippus at peace with them sounds like a good idea. Possibly make it so that the trait/status which allows this also makes you capable of seeing the true owner of any player controlled HN units, or maybe just making it so that HN units are not hostile with you, even if the REAL owner is at war with you.
Hiding the HN promotion is cakewalk. Just set it to be an EffectPromotion and then add HN to the list of exceptions (currently only equipment I think) in CvMainInterface which will still display for the owner, just not for everyone else.