I would think the stress from that would definitely kill them. Why do you need to do this? You can go to your local health food store and buy fish oil supplements.
Yep. You might as well ask if olives are harmed when making olive oil. They put the whole fish through a big processor. You can get vegetarian omega-3 oils made from algae though if that is your concern.
I'm sure it's from dead fish. Don't worry about it too much - be thankful that at least fish processers find a way to use every bit of the fish with minimal going to waste. They grind up the unusable bits to make fish food for other fish too