3. That is pin programmable, so up to customer choice. I flew both on 737s with heading up and track up NDs.
1. To be fair, i flew last on 737s with IAN, in which case any non precision approach (except non-straight in approaches) would be flown with the ILS procedure using the APProach mode. However, we still had a few old aircraft without IAN, for those we did set the MDA in the MCP, and when around 500ft above MDA set it the MCP window to missed approach altitude. The reason given for setting MDA initially was that VNAV path can revert to LVL CHG due to minimum speed reversion with less than flaps 15 selected, which could result in a rapid descent, MDA assured at least not below that. Since my books are fairly old (now on the bus for the last 5 or 6 years), airplane behavior could have been changed since.