1. Refer to 1.2.4 Movement by Divisions. When a ship of the division is receives damage that slows her to 10 Kts less than the next slowest ship in the division or less than half the division’s remaining speed, she can maneuver independently. So, the damaged ship should turn out of the formation, and the following ships (assuming they are in line astern) should maneuver if necessary to avoid the damaged ship, and then to close up to the leading ships. A collision is possible, but if the ships started a reasonable distance apart, e.g. ~1000 yards, it should be possible to avoid a collision. Note: when putting the ships on the table, don’t fall into the trap of putting the ships one behind the other in base-to-base contact. This is a common mistake I see, which can lead to the distance between ships, measured fore-funnel to fore-funnel, being considerably less than 1000 yards (especially with DDs).
2. I have seen it played both ways. 1.3.1 Collisions states “Captains must roll a D12 for each vessel or surfaced submarine that moves within 500 yards of another vessel – of either side – during the Movement Phase.” My italics. To me this implies you should do some sort of “impulse movement”, and determine if the ships ever come within 500 yards, when a collision is possible; however, particularly in large games and/or games with inexperienced players, it is much simpler so play where you just evaluate it at the end of moves.
3. Not sure what you’re getting at. If the target is beyond visibility range in the daytime, you can only shoot at it with radar blind fire (requires R+ RFC, see 1.11.6 Blind Fire) or with aerial spotting from the ship’s float plane (see 2.17 GUNNERY SPOTTING).
4, I would say yes. Though see answer to #1. If you’re keeping your ships in formation 1000 yards apart, you should be able to maneuver to miss the Flotsam & Jetsam Marker (1.13.2).
5. It is exceptionally tough to play a game taking place at night, and come anywhere close to modelling the confusion that occurred historically. For example, it takes a draconian application of the 1.12.7 Fratricide rules. Dummy divisions (1.12.2 Pre-Detection and Dummy Markers) cannot detect/acquire. Best way to deal with it is to have a Judge/GM. If not, first, pre-plot the movement, and then let each side hide their detection/acquisition rolls – so they can roll for a dummy division, but regardless of the result say they failed to detect/acquire.