Manage Software Installs of your Semi Mass Manufactured Product
1.) Order your flash pre-programmed from your supplier.  Usually you can use JTAG to reprogram on the line if things change.  Or maybe an ISP header connected to the flash lines if you don't have the JTAG option.

2.) Yes. Especially for smaller runs, or things that need more reliability.   Sometimes with high volume consumer products you either test samples or do a simpler test.  I'm a little obsessive so I usually have everything tested.  At my US factory test time costs about $1/minute so I can afford it.