Hi Marcus,
Thank you for your questions.
Disclaimer: I also work on WTM from time to time, so I hope can answer these questions to some degree :)
1. WhoTracksMe is served via CloudFront, it only get's the IP that CF reports. To get the country, there are two ways that can be used. IP => Country mapping via a Database or additionally, because CF has multiple edge locations, if needed the you could see which edge location served the request, that will help you narrow down the location at a country level. Ofcourse, in both cases if the user is using VPN, you would only records the VPN location.
2. The problem we want to avoid is same IP with same hashing algorithm will produce same value. Which can then be used to co-relate user activity across days. Second, depending on what hashing scheme one is using, rainbow tables can be used to get back the original value. Therefore, to avoid, we used the approach of daily key. Now that I write, we could also use some hash + daily_salt. This should give the same guarantees. - Needs to be checked.
3. In this setup we are not using Cloudwatch but Cloudfront, which is the CDN provider from AWS.