Hi! Glad to anwser all these.
1) That is correct, +1 wood per action. Might not seem much, but it is way easier for him to recover from zero and save the tools for the hard events when investigating. Also that +1 flamewood will come in handy for trading at towns and such.
2) That's correct.
3) As with the rest of the game, it is designed for the player to chose whatever is or seems less harmful at the moment. So, whichever you want.
4) It is 2 K and 1 Q. The idea is that the player will choose Twist Reality/Spread the Darkness often, since those are the "less harmful" actions. Also, whenever the Diamond pile empties up, you start drawing from Spades every time you investigate. Also, whenever you find the Cemetery, you can retrieve "and find" one of the special cards from the Spades deck, be it the last Q or one of the Ks. So there's 3 failsaves in the mechanics to keep the game from endlessly stalling
Hope this helps!