1. The pedals actually modify the amount of torque produced by each of the main rotor blades. For example, if you push on the right pedal, the controls are moved in such a way that your counter-clockwise rotating blades slightly increase their torque, and your clockwise rotating blades slightly decrease their torque. There is no net change in total lift, but your torque effect has changed, resulting and the aircraft's nose turning to the right.
2. In an aircraft like the Ka-50, it will be impossible to control the aircraft without hydraulics. I can move the controls on an Mi-17 without hydraulics, but it takes just about all the strength I can muster. In flight, a complete hydraulic failure means that the aircraft is uncontrollable, period. In other words, a Ka-50 without "power steering" is going to crash. Only very light helicopters are flyable with a total loss of hydraulic power (some don't have hydraulics at all).