If you are a USC and your wife entered the US legally, then adjustment of status is possible.

USCIS will return if application was sent to wrong location but likely should be transferred to appropriate service center.

Generally an affidavit should be notarized.

You can contact the service center to request expedited processing.

It means that the case is under active review and decision should be made soon.

It can take 1-2 years for I485 approval after I360 approval.

No re-entry will likely be an issue with information provided.

No not based on current family based categories.

This does not appear to be an immigration question.

No this is not a requirement for such case.