1. A lot, for supporting characters their personality has to come out in the things they say, and I make a real effort to choose the things that they would say. On my computer I keep my notes in folders and I have a folder for each character where I write down things about their past, things that concern them, and the things they say. They all have traits that affect their dialogue, elegant, uncouth, tactless, hysterical, so anytime I hear or think of something that they would say I write it down. After you get the hang of the sorts of things they are supposed to say it gets pretty easy to come up with them on the spot.
2. Easier. I have a folder of narrations too, where I just have clusters of descriptive sentences, but I can make dialogue flow easier than I can connect these narrations.
3. The most fun I have reading is reading the main characters thoughts. I specifically choose my books based on the style of narrative, and I like active and self aware characters the best. The characters thoughts can positively charm me, more than narration or dialogue anyway. I see their thoughts as an aside to the passive direction of plot, like thinking things through, or describing everything, for the readers benefit. I don't know if I'm really selling the narrative choice to you, but if you want to see for yourself, look at a self aware narrative like in the Kate Daniels series by Ilona Andrews and see what a difference it makes when compared to a passive, pompous, negative narrative like in Twilight and you'll see what I mean. I love Kate, she never fails to charm me ;D