1. I'm not 100% sure about the dotted lines but I think it's when the divergence goes from bull to bear and bear to bull on either the top side or bottom side of the trix.
Divergence is from the turn of price to turn of price. I'm not sure if it can be changed.
I have just used the standard settings that come with the indicator.
It's is the trix that comes from the THV system.