1) Correct, I go into hibernate. Restarting takes much longer than hibernation, and the computer loses its current settings (music playing, gps signal, etc.).
2) That all depends about the camera. If it's a USB camera of some sort, it could trigger your front end to switch to the camera when going in reverse (assuming that you're using the power wires from the rear signals to start the camera).
Or, IIRC, the Xenarc screen has an RCA input that it defaults to when it detects signal (ie: The camera plugs into screen, when screen sees camera turn on, it switches to it)
That is my understanding.
I originally wanted a camera, but then I realized its just for show (depending on the driver). My Mother has a backup camera on her Audi SUV and it works nicely, but she's also not comfortable with parallel parking her SUV, so it works out. Personally, I park just fine