1) No. See e.g. La'Man.
2) I am not going to answer this one, for reasons that should be fairly obvious.
3) Bug hunting is simply that: going hunting for shadow bugs in the tunnels of the Deeper Downs. In TSoG, as you point out, the Deeper Downs serves the same function The Cave does in TPA2: it's a location where you can get varied, randomized battles to fight. I was planning to make it a full visitable location early on in the game's development, but I eventually decided that it would be better to have fewer in-game locations with a higher density of interesting encounters in each.