Good story.
About houses:
The words and descriptions of the sorting hat are obviously a lie. Examples:
Pettigrew was NOT brave.
Draco was NOT cunning.
We don't encounter much of the other houses - it seems they are not there for the most part. But if the hat's words were true, Hermione would be in Ravenclaw, Nevill (who, let's admit, was not brave) would not be in Gryffindor, Ron and Percy would not be in Gryffindor also, as they are more ambicious than brave. Draco may not be in Slytherin as he is rather stupid (how many times can one man step on the same rake?). And so on. Also the hat told Harry, that he could be in any house. Lets sort through the facts - in canon Harry is not clever or knowledge seeking, is not ambicious or cunning, and most certainly is not hardworking. Now why would the hat put him in any of other three houses?
So, all this sorting smells rather fishy.
I guess it's one more thing for your Harry to be cynical about :)
I (and many other readers) always had a lot of questions that were never really answered and I think you could use some of them for the inspiration.
1. Fan mail for Harry - where?
2. There were mentions of accidental magic that Harry had executed - why had he never thought or investigate it?
3. "Strange people in robes" greeted Harry on streets in his earlier years of life. Had he never tried to speak with them? Why?
4. Why abovementioned wizards and witches had never tried to ask why Harry had been wearing rags, why he had been so thin, small, pale, etc.?
5. Why abovementioned wizards and withes never tried to just speak with Harry (remember his first foray to wizarding world and happenstance in Leaky Cauldron)?
6. Petunia told Harry (first meeting with Hagrid - in the shack on the rock in the sea) that Lily performed magical acts - right after starting the school. What about underage magic?
7. Hogwarts is private school. What about muggleborns who are too poor to pay for the tuition?
8. When I was in school (and it was not private), we had about 20-25 subjects, I think, may be more, but not less. Why does magic school have less? Where young wizards and witches are supposed to learn geography, mathematics, biology, languages, literature, etc. - the subjects, that even wizards should know?
9. If the Hogsmead is the only fully magical community in Britain, why are wizards so ignorant of muggle world? (Besides, there were mentions that Harry had seen wizards and withes in buses and other muggle places).
10. I'm not even going to begin with questions that imply manipulation from Dumbledore - Hagrid as guide, no explanation of schooling and wizarding world, key to the vault, no mentions of platform 9.75, Weasley family talking about magic platform among the muggles, - oh there are soooo many little things...
11. Harry's hair (growing back after each cut) - it was never explained.
12. C'mon, Harry never tried to do magic or read his textbooks before the school? Even if he had had only one hour before the train it'd been completely ridiculous.
13. Ah, one more - was it ever mentioned to Harry that he could not do magic outside of school - I don't remember this one.
14. Harry for the first time in his life had money and he hadn't tried to buy something except suppllies? O_O
15. Harry never tried to learn about his own history from the books mentioned by Hermione - in the situation where he desperately wanted to know more about his parents. Strange, not?
Meh, I'm too tired to continue. Sorry for the bad grammar.
I guess if you are interested in other such questions besides the ones you might have yourself, you can ask all of your readers, and will be buried under tons of them.