This 「で」 is explained here:
How to parse 中国人で日本語が話せる方は、お電話ください。
I always wondered if it was possible to replace である with で, is it what that is?
No, it is not, but you almost got it. In meaning:
「で」＝「であり」 and not 「である」
That is because 「である」 is in the terminal form, with which you can end a sentence. 「で」 and 「であり」 are both in the continuative forms.
1- How would you translate さも in this case?
2- Is かの如くsomething working by itself? It reminds me of かのように
It can work by itself, but in this case, it works in conjunction with 「さも」.
「かの如く」 means the same thing as 「かのように」. Only, the former is more formal than the latter.
"As if (someone) were the party concerned and knew the truth, s/he would create new and uncanny stories and..."