1.) Yes
2.) No, you'd need planned orders for the packed products, which will drive planned order(s) for the bulk product. You can then optionally use the "firm & consolidate" button which looks at the pegging from the bulk products to the packed products it is supplying and encourages you to balance out the bulk production qty vs. the demand for bulk from the packed products.
3.) You would process each packed product batch order on its own, or you could use the periodic options to estimate / release / start / RAF by consolidated batch order #, but there would be some selection criteria you need to input.
4.) Instead of having 10 packed products for each grade, you could look at using product specific batch attributes and customer specific batch attributes, have one packed product with a "Grade" as a product specific batch attribute, then set the "Grade" attribute value to 1 thru 10 either using a quality order, manually on the batch attribute values form, or through some type of integration. You can use the batch reservation form on the sales order line to search batches on hand by attribute value. IE Customer 1 will only buy grade 2, and customer 3 will only buy grade 5, this can be supported using customer specific batch attributes and batch reservation. You could also use a product dimension and re-name it to grade, but this generally doesn't play nice with process manufacturing and is less flexible in my opinion.
5.) My employer (RSM) has a solution for this for dairy production, class 1 thru class 4. It could likely work for the scenario you describe, but it also does quite a bit more and is probably overkill for this.
