<p>Is it possible to have all the computing capacity of all the hardware nodes allocated to one instance (for eg. one basic linux installation)?</p>

<p>How to manage the cloud?</p>

I think you're confusing cloud computing and grid computing here. Although they do have similarities.
Cloud computing is usually used to refer to solutions where data is stored somewhere on the internet and made available on any workstation that is online.
Grid computing is used to refer to applications where a lot of different agents solve parts of the same computing problem in parallel. (think Seti-at-home or folding-at-home)
But you can't use cloud or grid computing to just seamlessly run existing platforms. Both refer to architectures. There are a couple of platforms that are general implementations of these architectures but they're so different that you can't easilly run software on them that's not designed to run distributed.