Always answer truthfully. You are correct that as an immediate relative your unauthorized employment will be forgiven. If, however, you lie and USCIS discovers this, you will be found to have knowingly misrepresented a material fact and then will be forced to file a waiver for that misrepresentation - something that will be infinitely more difficult than simply telling the truth -
The affidavit of support is a legally binding and enforceable contract between you and the US government. It does not matter what agreement you have with your employee regarding her promise that her parents will not get food stamps, welfare... If any of those happen, YOU will be the one the government goes after and YOU can be forced to repay.
He can face both. he can be deported simply for being here without lawful status. whether he is convicted in criminal court or not. You should speak with attorneys well versed in criminal and immigration law.