Yes, there must always be a default image if the set rules aren't matched. However, you are able to 'collapse' the section to a 1x1 or 600x1 pixel image instead. This gives the appearance of a section 'collapsing' in the email.
You must make sure your html is coded for variable heights.
No there isn't.
Yes you can combine multiple conditions and use AND or OR to create the rules
The rule builder runs from the top down. This means we will try to match the first condition first, and continue through the rule until we find a match. If we cannot find a match we will display the default image.