Voltage Dividers in a pull-up resistor circuit (why does the pin go to low)

The input is high-impedance and as such hardly draws any current. But let's, for sake of argument, pretend there flows a (rather large) current of 1\$\mu\$A. This current will flow through the 10k\$\Omega\$ pull-up resistor causing a 10mV (1\$\mu\$A \$\times\$ 10k\$\Omega\$) voltage drop across it. So in this case the voltage on the input pin will be \$V_{CC}\$ - 10mV, probably 5V - 10mV = 4.99V. That will be still recognized as a high level, so no problems here.
The 10k\$\Omega\$ is a typical value for pull-up resistors for this reason: even if there's a small leakage current the voltage drop is negligible. Don't be tempted to increase it to 1M\$\Omega\$, though it will decrease the current when the switch is closed. At 1\$\mu\$A leakage current the voltage drop will be 1\$\mu\$A \$\times\$ 1M\$\Omega\$ = 1V, and then the 5V will drop to 4V. For a 5V supply this will still be OK, but for a 3.3V supply the resulting 2.3V may be too low to be always seen as a high level.

For the pull-down the story is about the same. There doesn't flow any current in the input; you can't say that it would be connected to ground (in which case closing the switch would indeed cause a short-circuit). As such the input takes the voltage you apply to it. If the switch is closed this is \$V_{CC}\$. If the switch is open it's ground (through the pull-down resistor). If there's no current flowing (ideal world) then there's no voltage drop across the resistor either, and the input will be at \$GND\$ level. In a real world situation it may be a few mV.

The switch is essentially an ideal conductor, with a negligible resistance that can be ignored. When closed, the node between the pull up resistor and the switch is pulled to ground or 0 potential. The resistor, as ohm laws would dictate, carries the 5v across it, "using" the voltage. Since the path of least resistance is a direct connecting to ground, the node is pulled to ground.

When the switch is open, the node is open, and no current flows, bringing the node to 5V through the weak resistor.

Think of the switch as a direct wire.