1. Yes. Absolutely. For a married couple to file separately is the most expensive and costly way to file tax-wise.
2. I think so, if they were not in the country and are not a U.S. citizen. Not sure on that, but the program will know if you answer the questions correctly. Remember to read the small print before answering a question or making a selection.
3. Yes. All worldwide income is reported. That doesn't mean it's taxable. But it does have to be reported.