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Question 3:If I play Grapes against a Hero that is Protected from Shuffle, what happens? Does the current battle still finish, and if so, does the rescuer get to make another RA afterward?
1: I would say that you begin a new Grapes battle before Ambush, since Grapes inserted its ability before Ambush the City's condition triggers. I think this would be consistent with the order of Michael+Angel's Sword vs. an EC with Horses.
You play Ambush the City, set aside that battle. You make a new rescue attempt. Someone plays Grapes, and the current rescuer has the fewest souls, so the ability to start a new battle is inserted before AtC triggers. You make a new RA, and that resolves. Then the AtC finishes its BC.I am certainly not 100% on this, but given the fact that 2kH can insert its ability on a CBN Angel's Sword, I'd say that Grapes can insert its ability here.
I have a question (and please inform me if this has already been asked as I only grazed over this thread): What if I RA with fewer lost souls than my opponent and use AtC, then win the replacement RA, and then play Grapes of Wrath during the old battle which had become a BC? Do I get to make a third battle, and if so, would it be a RA?
You can only make one rescue attempt per turn. That is in the Rulebook. Your battle phase only includes one rescue attempt. You cannot go backwards in the order of your turn.
Grapes specifies that the current rescuer can start a new battle. You are not a rescuer during a battle challenge.
That's not true. You can make multiple rescue attempts during your turn using cards like Grapes, The Long Day, and Ambush the City. It's just that none of these allow you to have completed a successful rescue attempt before the new RA starts, so you can't have more than one successful rescue attempt in a turn.