[Imp]

1 & 2) The AI has no idea where you are either, slow down & scout effectivly to find him, have patience just because you see him doesnt mean you need to attack him.
Gaining local superiority takes time in WW2 if playing with realistic forces as most nations lacked adequate transport so your moving up on foot. MBT requires less thought due to mech infantry being able to switch positions faster. If you have some mechanised units keep them in reserve to move to the point of contact.
Smoke is VERY powerful both for protecting the original contact units if you make a mess of it & for moving up reserves under. You can then use it to screen out some of the enemy force letting you choose who to engage & gain force superiority.
Remember you can advance in the wrong direction to falling back & regrouping is a valid tactic if it all goes wrong.
3) Thats your imagination working overtime.
4) The AI gets forces based on the force points you deploy so going with 2/3rds is not an issue. Not sure with special battles where you are not allowed to repair if you choose to do them. Would make more sense if they were based on the points total for your fully ready force.
Long time since I played SPWAW but yes units are more inteligent at picking targets, took a while to get my head round but it comes, WAW units seem to fire at everything while WW2 gauge the threat.
Example a tank might not fire at an halftrack at medium range but will fire at a tank, it will however fire at the halftrack at closer range. Getting a feel for how this works means your overwatch becomes much better.
A tip with vehicles unless in safe areas never use all the move points that way you can pull back if something takes a shot at you. Not always helpful the AI may well decide not to reaction fire especially RPGs till its turn. Now it can hopefuly take multiple shots at you.