Regarding question 1: this setting should not be needed; we have it set to false on our DXA Test Environments where XO works perfectly fine.
UPDATE
Regarding question 3: check the XO docs for how to setup XO Experiments. From a Web App perspective, Experiments are just Promotions which will randomly show different items. Furthermore, the DXA XO Module automatically takes care of rewriting links within Experiment content so they get tracked in Google Analytics.