I would actually like to know the answer to 2 and 3 myself. My speculation would be that the discontinuation of the Dreamcast came as a surprise to most 3rd parties and possibly even to internal developers.
From what I've read over the years it seems like Sega tried to hold of discontinuing the system as long as possible in an attempt to turn things around. Sadly that didn't happen and rampant piracy certainly didn't help their financials.
As for question 1, that really isn't so surprising.
Just look at the Official Sega Saturn Magazine for instance. While the Saturn wasn't discontinued in the same manner as the Dreamcast, it certainly was dead in the water long before the magazine finally stopped.
Although in their case they were trying to keep their readership till the Dreamcast was released in Europe with the hope that they would change into the Official Dreamcast Magazine, but that didn't happen since the licence went from EMAP to Future.
Number 4 is again a bit of speculation, but from what I remember, the game was indeed just about finished.
The reason it wasn't released was because in their estimations, the numbers just didn't add up.
Releasing a game along with marketing costs a ton of money, so it was decided to cut their losses with just the development, and not eat even more losses with a possible failed launch and marketing campaign.
A real shame if you ask me.