1) That's lag, if you remove lock-on and run "ahead" of the monster, you can hit it. Your character always appears further ahead of where the server thinks it is.

5) I'm pretty sure that's a PS2 RAM problem that they'll never be able to fix unless they drop support for the console. Even if it wasn't, it would require a lot of reorganizing of code to work, to the point where it may actually not even be possible.