Cards that you never get to see in a real life game of poker should not be able to be seen in an online version of poker. That includes other people's cards if they don't show, the deck, the burns ... if you wouldn't see it, you shouldn't be able to see it.
Yes, and that's exactly the problem that "mental poker" solves. My client knows which cards your client should be allowed to see, and sends just the keys required to decode those cards. So when I show-down to you, I do so by sending the relevant encryption keys. And when I muck, I don't.