Well here's some answers...from a Disneylander's point of view.
1) You have to complete all the quests...the Frontierland/Critter Country (in
Disneyland), Fantasyland, Adventureland, and Tomorrowland. Then, if you get all the questions correct on all the quests you get a VIP Insider Tour card which allows you sign up for a tour and lets you get a VIP badge on your character in the game.
2) You get backdoored onto 3 rides...Jungle Cruise (to answer questions about the game...to get more codes!), Big Thunder Mountain Railroad (to answer questions to get BTMRR Teleporters), and Haunted Mansion (for the Haunted Mansion quest to get up to 7 items). Between the rides, the tour guide is very informative about what's coming soon in VMK (we got to see all the future costumes) and the comparisons between the park and VMK.
3) It can take up to 3.5 hours, but mostly 2.5 hours if you allow yourself 15-30 minutes of VMK time at the end of the tour. The tour I took was especially long because of the huge crowds at the park.
4) My parents had a wonderful time taking the VMK tour. If anything you get to go on 3 rides, with little or no wait. The tour is all centered around VMK. Schedule it on the busiest day of your trip and you'll all find It's a great way to spend 3 hours.
5) Yes, the entire tour is about getting free things. You do get to take the Haunted Mansion quest which can yield up to 7 items (including the Haunted Mansion guest room) and the Jungle Cruise questions can get you a couple cards depending on how big your tour group is. At the end of the tour you also get the Gold Show Designer's collection which yields 5 gold items.
Hope this helps you out!