Hi Praveen,
Point 1: Tool will give you the flexibility to choose relevant flow (for eg till staging layer or L2 layer). You can select those objects manually from migration cockpit and convert to BW4H compatible object. It will ask you the TR to capture the object. (Verify the TR manually to avoid additional object captured by migration cockpit).
Please check : https://blogs.sap.com/2020/10/24/bw-to-bw4hana-migration-in-5-minutes/
Point 2: I can't suggest as i haven't tried it without having source system defined. You can create dummy flow and test how it behaves.
Point 3: As a pre-requisite, for Prod yes it is advisable to have a system backup before migration.. but for lower environment it would be need to need basis, Few customer won't agree due to increase in cost. Alternatively i have seen customer having dual stack Existing landscape + New BW4H landscape to avoid system conflict at later stage.
Additionally please keep on checking support.sap.com under component BW-B4H-CNV (Conversion) to find about new fixes coming in.
Regards,
Pradeep Jaiswar
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