From my understanding, if you are still under a contract you can renew new two year contract. My contract expired in October, and I was eligible for an additional two year contract with a subsidized phone. You can call 800-922-0204, and make sure that this is still valid.
No. Do the Edge program. You'll still get a new phone and not be obligated to the level of service. The only "contract's" for the phone purchase.
If I am not mistaken with device payment option you get a line access discount depending on your plan. Otherwise with a 2 yr agreement you would pay $40 per line access.
The bargain is independence. Verizon isn't going to penalize you for just contracting the phone because they want you as a service customer, but doing the two year service "plan" obligates you. If you just do the phone you can go anywhere without penalty.