Here is my thoughts based on experience.

First the links don't disappear from Webmaster tools. You will still see them there. A reconsideration request only helps if you got hit by a manual penalty not algorithmic ones. If your traffic dropped after the disavow list was supplied it could be that you told Google to kill some valuable links and now you are missing that link juice. Though with that the  flip side from mantra of causality and correlation that Rand preaches. Google has been rolling out some changes so your traffic drop could be unrelated.

I would go back to the disvow list though and see if they put some links in it that shouldn't have been flagged as spam and resubmit the list.

One thought is to Check your GA code, sometimes we see sites (mostly Wordpress) accidentally install the old code and new code on the same page and get wacky metrics like that. If that is the case you should see an extremely low bounce rate.

Gregory summed it well, my only add on to it in setting when adjusting the geographical settings also adjust the intent. So if you have a German in Berlin searching for "my service in Newcastle" they won't be served the ad if they out of the actual area, if you don't want any non UK PPC visitors.

Nope, as far as I know. Matt Cutt's commented on it https://www.youtube.com/watch?v=AsSwqo16C8s

The only time I could see it was useful if you were doing some black hatish stuff and didn't want multiple domains on the same C Block that were related, but I'm pretty sure Penguin/ Panda is catching that sort of thing now.