Hardwood floor refinish | correct / low cost finish?
A1: Whether you or another appearance critic (spouses are common) can stand the way it looks. You pretty much have to try a spot and see what you think.

A1a: Don't use poly if you don't want a high gloss "look". Use an oil and see what you think. Even "matte" polyurethane is pretty shiny, as things go - but also look for yourself, that's my opinion.

A2: Sure, if you don't sand that deep and remove it all.

A3: a hardening oil finish will actually get dry. A non hardening finish, won't. Much easier to get the floor somewhat clean if it's not sticky. There is some problem of marketing confusing the issue - some vendors sell a "hardening oil finish" that others (more truthful) would just call a varnish. At the most basic level you have raw linseed oil and "boiled" linseed oil (not actually boiled, for the most part) - the raw never hardens, the boiling (or other chemical treatment) makes the boiled harden. Or "salad oil" (soy or canola) .vs. walnut oil - walnut naturally hardens, salad oil never does. But salad oil can go rancid...

Most of the stuff sold as "tung oil" or "Danish oil" is better described as a wiping varnish