A reference letter confirms how you know someone, what they did, and whether you would work with them again. The last part is what recipients look for, so answer it explicitly — a reference that describes someone's duties without endorsing them reads as a refusal in polite form.
Generally no, unless your contract or local law requires it. If you do give one, it should be accurate and fair — inaccurate references can create legal exposure in some jurisdictions.
Decline, or provide only the factual confirmation of dates and job title. A deliberately lukewarm reference is understood as a negative one by everyone reading it.
Yes. A reference without a verifiable contact carries very little weight.