I am not really sure I understand the facts well enough to answer your first question, so let me answer your second.
a) You can request uncollecible status at your CDP if you qualify
b) You can request a CDP to enter into payment plan or also to claim hardship
c) Having penalties waived could be difficult in a Trust Penalty case. However, once you are negotiating with the appeals officer, they have lots of flexibility.
My advice is to retain counsel to help you through the process. If the 30 days is quickly approaching, file the request and retain counsel to proceed with the CDP.
Without knowing too many facts about your situation it is tough to address these questions thoroughly, however, I am happy to provide a basic overview of your questions:
1) In most cases you must file your CDP within 30 days of the letter date.
2 (a) and (b) If you feel you are in a noncollectable status, you should indicate this as your reason for requesting CDP. Desiring to enter into an Offer in Compromise, installment agreement or hardship (terminal illness, social security as only income) are some of the valid reasons to request CDP hearing.
2 (c) Based on the information you have provided it sounds like you are potentially noncollectable so negotiating on all outstanding amounts is a possibility. If the IRS determines that you are noncollectable, then you may be in a good position to enter into an Offer in Compromise after the IRS puts you in noncollectable status.
You should consult with a tax law firm that has significant experience in dealing with the IRS, such as our firm, to provide the tax attorney with more specific facts and financial background and the tax attorney will be able to assist you through this process.