1a. Yes. This option is off by default, but you can enable it in the Preferences (it's called Link to text files, something like that.)
There is a very good reason it's off by default! Every time you update the link, the original file gets re-read into InDesign, and that means that all of your InDesign edits will disappear. (I think it's worthwhile to make this point stand out a bit.) Only with a very careful workflow you can seamlessly transfer paragraph and character styles from one to the other.
1b. Well, it depends.
1c. Well, it depends.
"It depends" because you need to decide what you want to do with your Word file afterwards. If you intend to use this (and not the InDesign version) for any other further processing, you will need those edits.
It's also possible to export your plain text out of InDesign to RTF (although this will not give you the same Word file "with edits" back).