Everywhere around me broke street on this so I picked mine up today. Killzone 1 and 2 are disc 1 but Killzone 1 has to install to the hdd like Medal of Honor: Frontline and Dead Space: Extraction and needs the disc in the drive to play even tho it's on the hdd (and is 3 gigs). 3 has its own disc and the dlc for 2 and 3 are via a download voucher.
if you own a PS3 you should be used to installs by now so I'm not really sure why you were surprised/disappointed. I'm sure they had to compress Killzone 1 onto the disc with KZ2 in order for everything to fit without compressing KZ2 which is why there was a larger install. Most likely there is a portion of the game playing off of the disc but in order to improve the quality of how the game runs they needed an install base on the HDD.