1. The subs can’t hit air, so only the destroyer can be destroyed. The extra hit is simply lost.
2. Nothing can move in a combat phase. In the case you cite, the Germans can move in the combat movement phase (before combat phase).
The German player may move all, some, or none of the units in question.
Units moved into an adjacent sea zone that contains enemy units that are not transports or subs, they will have to stop there and fight.
Units moved into an adjacent sea zone that contain only enemy subs and/or transports (or nothing at all) can continue movement.
If a unit moved into an adjacent sea zone and could continue movement, it could continue to another adjacent sea zone to enter another combat, or including the original sea zone it started in. (Why move back and forth? For retreat movement rules, for example.)
If the combat movement phase ends, and there are enemy units in a sea zone or land territory, combat is initiated in the combat phase.
To be clear, any, all, or none of the German units may be involved in combats, at the German player’s discretion.
3. There are no optional rules for including neutrals in the game. There are a few optional rules in Spring 1942, but neutrals is not one of them. If you want to play a house rule with neutrals, you can look for them or make up your own. I am not aware of any commonly accepted house rules for neutrals in Spring 1942.