I went to the 2008 Olympics and ran into a bunch of ex-pats there that told me whole apartment blocks were razed (as I'm sure you heard) and the inhabitants never compensated and also, many foreigners were essentially kicked out of Beijing for the duration of the events so that they wouldn't speak to the visiting press.

The amount of effort that went into PR for Beijing was crazy, what with training the residents how to interact with foreigners and not to cut in line, spit, smoke, talk loudly, etc. The sidewalks even had railings so that no one could jaywalk.

If Sochi is indeed as shitty and ramshackle as these journalists are claiming, then I can only wonder how bad it was before. I just heard a Russian guy on the Diane Rehm show talking about how the Russian government was more focused on the sports facilities than the lodgings. It seems like journalists are really digging for concrete evidence of massive corruption, given the estimated expenditures of the games (which the Russian claims is $50+ billion for the whole region, not just Sochi itself).

what would the US do if we had to host the Olympics? I'm sure people would get displaced for the games and so on. What are we gonna do, put 'em up in hotel rooms?

It probably depends on where it is. If it was in a big city rather than a resort, then I think the developers would have to be very careful. If it was at some resort town or whatever where there's a much lower and much less permanent population, I bet some of those strongarm tactics would come into play, depending on how much money those being displaced might have.