1) Yes, it's not scrapping, it's "decomposition", this frees resources useful elsewhere.
2) Auto produced items have a maximum per-turn production (country potential/cost based, if not specified in data), this means artillery production is always slow and units will be understrength. Also, units in poor supply situation generate smaller requests for replacements than they should have.
3) This is WAD, in order not to drain pools when new equipment is made available. Unfortunately there is no manual control for these things for the player to adjust this speed to his liking, while in general slower is better than faster. Only certain elements which can be upgraded in the field (upgrading a gun to a new model requires delivery of a full kit, giving a panzerfaust to a rifle squad is basically ammo delivery), which is called "conversion", get a boost when new model comes online and the older model is no longer produced.
4) Unfortunately the replacement system is not clever enough to differentiate between secondary attributes (like caliber) inside ground element type (like "Medium AT gun") to prefer heavier variants; also if there is a mismatch between element types (TOE calls for "Light AT Gun" while "Medium AT Gun" are available) it will not ask for such equipment (at least it was made clever enough not to send back such items if they are already in the unit, thanks to grouping element types into "families").
5) Same as above.
Many problems which were described in 3-5 come from the fact that you can't mix multiple elements in a single unit/TOE slot, so there is no way to do gradual replacements, hence items are kept until they reach low numbers and they can be swapped entirely. Also for most items the game tries to swap only to full number of elements in order to reduce swapping back and forth every turn (if TOE calls for 12 guns, and you have only 4, there will be attempts to swap them to 12 guns, not 4). Once again, for certain items (like rifle squads) this requirement is removed, because it would lead (and it led in the past) to unit starvation, as - for example - the German army can't suddenly find 200k extra men to upgrade every division to full number of rifle squads if they are all understrength.
Certainly best way to introduce new items to units is by TOE upgrades. Then units know they miss something.