1: Reads/Writes are just routed to a COTS SD-card. 2: Unless the (correct?) password is detected in the write-data that starts the disconnect procedure.
The only way to detect it from what I can see is to profile writes then append a "password:" string multiple times to measure the write-delay, only works if the CPU cost is large enough to overtake the SD-card measurably and some constant-time optimizations should make it more or less undetectable.
It's a clever design and I think it should be possible to optimize to become more or less unrecognizable.
Money, even at state level, is not some infinite resource (and neither is time).
States put effort into what they consider worth investigating - no state strip searches every incoming traveller, and goes through every item in their possession - it's possible for them to do, and if they did they'd find a hang of a lot more contraband, but it's costly, time consuming, and politically risky.
If the idea is that there's no point in encrypting anything on a USB stick, and you just hope they don't look at it at all, sure.
But there is no threat model here that includes "check the USB stick" and does not automatically lead to finding and breaking "hidden" content.