I agree with my colleague's excellent answer.

You are right - proving a negative has never been easy nor simple. Use your imagination.

Can USCIS notify embassy of the asylume seeker saying he/she is seeking protection?

I agree. USCIS never notifies anyone or any "embassy" - it is the mainly local employees of the home country US consulate that "find out" sooner...

Immigration: Which one is better? To file I-130 online or with paper?

Avoid "online" or else you risk being very sorry (and upset)

Immigration question

I agree. Your lawyer is right. Sending a copy of the actual RFE is sufficient.

Do we need to file for B1/B2 extension together or separately?

While a married couple can apply for EOS on only one I-539, sis in law needs her own.

Joint sponsor: NVC income ?

I agree. A co-sponsor should be a blood relative and if financially qualifies, only provide the last year's tax return.

Should I wait to file for my citizenship?

You do not qualify to apply under the 3 year rule anyway. Apply under the 5 year rule. Wait.

For undocumented students can they sign affidavit to get in state tuition and state financial aid at their state residence?

Yes, go ahead and sign such affidavit - you have everything to gain and really nothing much to lose.

I agree. You have nothing to worry about as far as your GC application goes.