Can the Magic Keyboard be used with the USB-C to Lightning cable? Can the Magic Keyboard be used with the USB-C to Lightning cable and have the keyboard actually work as a keyboard (not just charge the internal battery)?

The "Here's what you can do..." mentions said keyboard, but only for charging.
Yes, you can connect it up with the USB-C to Lightning cable and use it as a keyboard.

USB is backwards compatible in this manner with the previous versions of USB. The Lightning port really carries a USB signal for data purposes.