3) Yes, that's the way things are supposed to work. There is quite a bit of disagreement with it in the community however. Basically, if you have 100% spending, and 33/33/34, you will be getting 1/3rd of each of your production values. At 50% and 33/33/34, you'll get 1/6th. More or less, what this means is that the rest of that industry or research is used for "other" things, disease research, civilian production and the like. No matter what, unless you set your research slider and spending to 100%, you will not get all 24 of that research. Same applies to production, except that you can get all of it through dropping research to 0%. I believe there is talk of adjusting this somehow by the devs, but I'm not sure how nor when that might be happening.

Ok, I look at it this way:

Your Income:
Your population earns a certain amount of money (potential collected taxes).
The first slider lets you decide how much of the potential tax money available you are collecting.

The rest of the sliders are independent of how much money you are collecting.

Your Spending:
Your population then has a certain amount of people available to fill jobs and work in any industry to which they are assigned. These people of course need to be paid.
The second slider lets you determine how much money you want to spend paying the workers, thus how much of your potential workforce you employ. Each worker can only fill one job at a time, which is only in one industry at a time.

The 3 sliders under that let you decide how many of the jobs are put to use in that industry.

If you put them all on one, you can't put any on another. If you are spending 50% of them on your military production, then will receive not half of your total potential military production, but the output of half of the total paid workers.

This basically means that when all sliders are set to the same level (33%) that you are simply employing all of your paid workforce, spread evenly between each industry. By moving the funding over to one from another, you are giving that industry more people at the expense of the other. Therefore, you can only ever produce as much as your paid workforce will allow.