1) I think that it was discovered that damage does go up naturally as you level, it's just displaying your bonus damage modifier. That said, it does not look good at all to have a negative "bonus" damage modifier. Even if it is only bonus damage, needing to spend 2/2 points per level to maintain a neutral bonus damage is no good. Spending 2 points would be fine if you got 4 or 5 attribute points per level. That would let you keep up and still spread others around to different attributes.
2) Agreed.
Dragon Blaze is garbage and useless even if you are a warrior. You can throw a candle if you need to light things on fire. (Replace with "Shed Skin", please!)
3) Kalrakh, loot comes from RNG, so posting what you got doesn't mean that others are getting the same.
4) It was probably changed because the 1-2-3-4-5 system, with increasing ability points at higher levels was not all that intuitive (and not explained at ALL by the game itself). It is the same amount of points, but the smaller numbers give each point much less impact, making it harder to see how the individual points matter. This encourages leaving alone skills which give small percentages and focusing instead on your Skill abilities.
5) Agreed.
