1. No. You can negotiate with them, but few, in my experience, will take any less than about 90-95% of what they are asking for. If you let the system do it, it will offer 70%, and the player will get awarded their asking price every time. If you offer a little less than they are asking, you might save a few bucks here and there which you can use for IFAs and draftees later.
2. I usually arb a guy twice once they are eligible. If you arb 3 times, there is a good chance they will leave. So, if you have a guy you want to keep, arb him twice, then sign him LT. Signing him sooner than that is usually a waste of money.
3. If they say they will sign, they will. You can try to offer less, but no guarantee they will take it. They don't get angry though. They will still sign for their aking price even if they decline other offers. In my experience, some will sign for an additional year or 2. Doesn't hurt to try.
4. If you don't want to arb a player or sign him FA, you must release him before arb ends or the sysyem will make the 70% offer and you'll be stuck with him. Releasing him during arb will cost you no money. Release him after arb and you're on the hook for his whole salary.