1 - if you are in a panicked state, it takes you out of that state (so that you can actually fight again)
2 - Yes, it will decay
And there's nothing you can do about it
3 - No
4 - Yes, if you press "a" to "apply" a wand, it will break it. Basically, it's whatever normal effect it has, except instead of in a line, it does it in a square, and with more force. So if you break a wand of fireballs, it'll create a huge explosion... break a wand of teleport will teleport you and everything around you (items & monsters), polymorph will polymorph you and everything in the squares next to you, etc.
5 - That's because it's considered a cheat... the devs purposely don't let you change things into ommel excretions, they simply forgot to disable ommel cerumen.
6 - Just walk towards him as quickly as you can... if he leaps out of a corner at you, teleport yourself or him away (preferably yourself, that way you still know which general area he is in). Store all of your healing potions in cans, and drink them every time you turn red on your way over. Then zap him (2 shots with a fireballs wand usually finish him off for me)