I think it's great that the smallest subnet size is designed to be as large as to never run out of addresses in any conceivable application, no more wasting precious time manually assigning addresses and thinking about subnet economics
Effectively yes.
> I thought /56 was the smallest allocation an ISP could make for a residential allocation.
They can and often do make /64 allocations. There is an RFC (I think, might just be RIPE guidance or something) that recommends that ISPs issue larger to each customer. Many don't (as it is just a recommendation). Ideally they would allow a customer's router to request a larger allocation like /60 or /56 via a prefix delegation message.
A /64 can actually cause problems if you're chaining routers together. In IPv4 that'd give you double NAT which is obviously terrible and not recommended, but in IPv6 that's a fine use case that shouldn't cause any trouble as long as you have the ability to create sufficient subnets. With a /64, you're stuck doing weird stuff with DHCPv6 to get the subnets to work regardless.