Some packages give you options for different packages that conflict. E.g. if you install i3 it will let you choose between standard i3, i3-gaps or 5 others. You can only have one installed at a time.
I've been using Pacman for years never had a single problem with conflicts or anything else.
Yes, and they should be marked as conflicting, as OP suggested.
according to the wiki[1], packages which are non-cohabiting alternatives should use both "provides" and "conflicts" (and it's sufficient to list the original package name in conflicts, rather than all of the conflicting alternatives).