I noticed today that I never see any custom sp maps utilize the first person cutscene. Is this because it is not possible, or just extremely difficult.

It is possible, but only with limited functions. For example, you can't get Fp animations with a weapon, but you can still move the camera. Take as reference Jenkins's cinematic, in the level 343 Guilty Spark

I think it might be possible using a custom animated vehicle for the arms and player as camera

It is possible, not exactly the way you think you should do it, but I have done it.

RPSP uses them on S30.

so... not a third person animation with the camera in a position that the tp mesh arms mimic the firs person arms

short answer: no
long answer: no one would want to do the amount of work required to do them

Couldn't you use a 3p biped that is just the fp arms, custom animate it, and then try to recreate where the camera should be in fp for the cutscene?

3p bipeds don't have fingers so it would be very limting

Like I said, to much work to make it look semi-decent. Lets just all stick with 3p cinematics because Halo 1 was not set up to make FP cinematics work

The best way would be to export the FP arms as either a vehicle or biped and have a camera latching node where the camera is. Animate normally, hook camera to the node, have fun

Recorded animations + a VERY long weapon pickup animation = ?

i dont think pickup animation would be too great because during cutscenes, your FP weapon dissapears. thats why i said hooking with an extra node and having FP arms as a vehicle would be better

Originally in Lumoria we were going to have FP cutscenes, even the animations for a few were done. In theroy it was completely possible, but like Matt said above, it takes alot of work to do it and really isn't worth it in the end because they dont even look as good as they could.