@1 yes, but usually they're in pants -- and if they're wearing a skirt it's generally arranged a little differently. Many in Asia also squat that way to use the toilet as well. It's actually a comfortable way to rest once your legs get used to it (your heels have to remain on the ground; the western tendency to go up on the toes in this position is crazy and self-defeating).
They all have blank patches where "privates" would be revealed
...exactly like legal Japanese porn (anime and manga; live action the area is blurred instead). I'm convinced that prior to the internet there were many adult men in Japan who avidly consumed porn but had only the vaguest idea of what female genitalia actually looked like.