Aviatordom
To answer your questions:-
1. Yes, as far as I know you can choose any combination of letters but the rules differ between countries. In the UK registrations are normally not re-used, cannot have the letter 'Q' and consist of G- followed by four letters.
2. Yes they do block certain combinations which may give offence.
3. In the UK, anyone can reserve marks as long as they have not been used before.
Hope this helps, Andy S