Not always.
Yes that is true you can see into the eye during a cycloplegic exam. First off, my eye doctor did not do a cycloplegic exam every time, which contributed to him missing many of my eye problems. It is very easy to see a damaged optic nerve--during a cycloplegic exam. Without it, the irises constrict too much and you cannot get a very clear image into the eye. A lot of my eye problems are also in the brain--my occipital cortex has a hard time interpreting what information I receive. Because I was born blind (light perception) due to severe malnourishment in the orphanage, my retinas were not fully developed and I didn't have those crucial years for my brain to learn to fully interpret visual information. When I was adopted and my diet changed completely, I gained a lot of vision, but I still could only see light and colors. I had other eye problems such as accommodation insufficiency, exotropia, incyclophoria--all eye problems that are only noticeable upon close examination. The eye problems I just mentioned are routinely checked only by behavioral optometrists (vision therapists), not ophthalmologists (eye surgeons). Another problem lay in the fact I was going to an ophthalmologist, who was not trained to look for certain eye problems. My eye doctor, along with my parents, also directly denied my complaints. As a result of their being so convinced of my malingering, they missed a lot of obvious signs. When you're in denial, it's easy to miss a lot of obvious signs. When my ophthalmologist finally realized this whole time he had ignored my eye problems, they were a lot more progressed. With surgery and two years of intensive vision therapy (where I went to a behavior optometrist one hour four times a week with exercises every day) I was able to improve my vision to a point that I could read large print with very strong reading glasses. However, even my behavioral optometrist has failed me. He did not give me the tonometry test (airpuff test) to test my intraocular pressure. Now I have glaucoma that progressed much farther than it would have, had they caught it earlier--go figure.
Another thing to keep in mind is that doctors are human too. They mess up too.