Yes, you can link to them. It's not like you would be linking to them on a daily basis. As far as I know Google loves it when you link to relevant sites (outgoing links are valuable too). And what's better than competitors in terms of relevancy. And if they notice that you are linking to them, you could be making good connections with them and who knows, they might do the same. Everyone wins in long term.

Are they all thin content? If not, then I don't think it's necessary to NOINDEX them. If you think some of them don't have any real value, you could specifically NOINDEX them(and not all together). Google will crawl those pages no matter how deep they are, as long as they are accessible.

4 months since I posted this and look at the situation right now. It's even worse. Basically they have done completely the opposite of what they promised.

I am not surprised at all.

No it doesn't matter. If it's an Exact Match, Search Engines still see it as one, with or without the dash.