1. Yes, the sch. line will be copied over.
2. Activating availability depends on the business scenario. If ZAR is an actual order for which Delivery will be created, its better to activate Availability check. by that way if there is any unexpected unavailability of inventory you would know right away.
3. Yes, you can use the same Sch. Line cat.
4. consider the below example:
Only when you create ZAR with reference to ZOR you want CAT2 to be the default item cat and in all the other cases - when ZAR is created with ref to some other orders or ZAR is created without ref to any orders - you want CAT1 as default, then the config will be like below:
Item Cat Determination:
Order Def Item Cat Man Item Cat
ZAR CAT1 CAT2
ZOR to ZAR Copy control:
Item Cat Proposal - CAT2