1) Yes, you can create with someone else. One of you can publish the game in your Itch page and than submit it to the jam.
2) Basically means that you have to respect the copyright of the original game (most of the time, that just means giving credit to the original material that you are hacking). Some games make it easier to know what their license is. Some examples:
- Fantasypunk by TheGiftOfGabes has it written in the game page that Fantasypunk is under the Anti-Capitalist Attribution Cooperative License, making it clear that "you are free to hack, modify, reference, copy-paste, and more as long as you give proper credit and you agree that punching a fascist is always the morally correct choice".
- Free Stock Art from Lucas Rolim is under the Creative Commons license, so you can use and remix for your entry. Just have to give image credits to Lucas.
- You can see in my own entry for a previous Latam Jam that I put the credits for the original game on the entry page: https://ivancoluchi.itch.io/battle-for-manguetown