If it's like every other system, the rubber mount on the stock peg would be removed and it would be attached via the two bolts that are there. In your case, you may find it easier/quicker to just purchase another rear peg for cheap and attach the hydration system to it, and keep your running boards. If you need the hydration system, just remove the peg and bolt on the one attached to the hydration system.
That is correct.
BTW, no price has been determined yet - still fine-tuning the design. I expect the cost to be under $70 w/o the jug, which I bought for $5 at K-mart.