Hello Frank,
When you encrypt a folder, the content of the folder is copied into an encrypted spares bundle disk image and the originals are moved to the trash (I guess you understood this judging from your third question). When you decrypt the folder, the files are copied out of the disk image into the original folder (which was used as the disk image mount point while the data was protected) and the disk image is deleted.
For the non trashing option, this is a valid input, I will suggest to implement this as an option, but to set the default behaviour to be same as now. But what would you suggest, if the data is not trashed, where would you put it? We cannot leave it in the folder as it would be very confusing seeing the same files with both locked and unlocked folder. In the case when the folder is locked you would see your original files and when unlocked, you would see the copy in the mounted disk image. So where to put them?
There is no need to backup the single password for each disk image. All you have to remember is the master password you unlock espionage with, this password decrypts the Espionage database which contains the disk image passwords and relation between the disk images and protected folders. This database is automatically backed up (copies are created). In case of any trouble with the database itself you can revert to an earlier version. So what you should backup is the database (and the database backups/copies) and the disk images. As by default both are located in your home folder's Library subfolder, if you backup your user folder (which you should do in general) your Espionage installation is safe.
We never used single password for all protected folders, but in Espionage 2 you were required to define a password for each protected folder and one for unlocking Espionage. We are all humans (mostly :-)) and tend to keep it simple, so users would usually use the same password for all. Even if not, the passwords would be simple and easy to remember (and guess). So in Espionage 3 we opted for software generated very strong disk image passwords, all protected with one user defined password, and when there is only one to remember, users "dare" to make it more complex, and that makes the whole setup more secure.
As you seem to be concerned with security and want to know more about Espionage let me add just that there are also folder sets, which allow for multiple master passwords, each unlocking Espionage with different folder set, this can, for example, be used in extreme situations when you are forced to unlock espionage, you can unlock the fake folder set. There is no technical possibility to determine if Espionage has multiple folder sets or not.
Furthermore, as mentioned above, you can place files into a locked folder, those will be visible only when the folder is locked, and temporarily disappear when you unlock the folder. Again, this can be used to place fake files into the protected folders and there is not technical way to determine if a folder is a Espionage mount point folder or not.
Finally, since Espionage 3.6, we create fake disk images during initial setup, so the number of sparse bundle disk images does not determine how many folders did you protect with Espionage as the 1:1 relation is broken.
I hope this answers your questions, feel free to ask more if you wish.
Thanks for your interest in Espionage,
Zsolt