Question: Are all HFTs only market makers like this, or do some of them use other strategies (front-running?) that actually make transactions more expensive for others, or move markets a lot (especially in small caps, I would guess)?
HFT is a badly abused term that gets applied to any firm that uses computers to trade.
In reality, there are many other strategies that use automated techniques to model the values of securities using internal metrics and then trade when the price is above/below the internally calculated value. Such conditions usually indicate that the market has "mispriced" a security and will quickly realize it's mistake and return to fair-value pricing.
Many "algorithmic traders" use statistical techniques to determine optimum times to trade so they capture some profit margin with a high degree of certainty. Those statistical techniques can involve anything from automated balance sheet analysis and natural language processing of news items, to pattern-matching techniques designed to notice when a large buyer/seller has entered the market and needs to move a large block of shares.
