Oh woof, depends on how long the machinist cut the keyway and made the key. You definitely want the prop shaft bottomed out in the coupling or flush with the face.
It is most likely fine. The machinists sometimes (often) make the key and slot longer than it needs to be. Important thing is to look carefully at the key if you remove so that it goes back in exactly the orientation as it came out. Some keys and keyways are tapered.
Yes, and a principle way the keyway gets buggered is when the wrong key is put in (an ill fitting one) or it is put in incorrectly (some have tapered dimensions). If everything is not very snug in the coupling, you can imagine what happens when your crew jams the engine into gear with the engine above idle a few times.