1. Yes, cheating is very unfortunate. So is how such nastiness is permitted in the tennis culture amongst parents. It makes the sport a lot less fun for a lot of children.
2. This really is not a bad thing. See it as an opportunity to play a much better player. Chances are the #1 seed isn't going to come to your local club to play a match with you, so take the opportunity to try to play your best and see how you match up. It will help you in the long run to get better if you do not try to avoid playing tough (even unwinnable) matches.
3. Yes, I wonder the same thing. What's the point of all the craziness in junior tennis when the vast majority of 3 and 4 star players seem to end up at schools that they never would have chosen were it not for tennis. I'm thinking of one crazy gossipping (really unpleasant) tennis mom in particular. At this point, does she still think her 4-star 16 year old daughter is going pro? Will all the nuttiness pay off in some way down the road? Doesn't seem so.