1. not entirely sure what you mean by that, but...
2. Yes, as you lvl or acquire apprentice/adept books for the skill, the damage output will increase.
3. The pet seems to level up as you level, and when I bought the apprentice II scroll for the spell, his level seemed to bump up by one too. He is always even conned to me now.
1) The color of youre spell is like the color of youre armore, it reflects youre current level. By the time one of youre spells turn grey you should have a more affective spell, also I'm not 100% sure but I think upgrading from app1 to app(somthing higher) will also change the spell. That will also affect the damage. 2)Getting more INT or upgrading that spell to a higher level. go from app1 to app2 or 3, or even one of the higher levels. 3)Youre pet should level up with you, also again getting higher level apprentice or adept spells will help with this.
Yes your spells change color as you level showing how effiecient you are in them just like your armor. Also they higher levels that are orange and stuff do have a higher fizzle chance.