Need help understanding how this decoder IC & differential amplifier circuit works
1) No. The amplifier has 9.4 gain so 1.7 Vpp at input is 15.98 Vpp at output. For some reason you halved the input Vpp voltage to peak amplitude. Obviously the decoder is not set to full volume.

2) Yes, each output pin has maximum output of 4 Vpp when used with 5V supply. Input voltage and gain must be chosen to be in useful range so it does not clip.

3) Yes, sure it needs 5V supply to provide 4Vpp single ended outputs and this is 8Vpp differential to the speaker.

4) As there is 2VDC bias on both outputs, and speaker is connected between both outputs, there is no DC bias over the speaker. 2V minus 2V is 0V.