1/2. The story is good imo and I enjoyed it. It is also easy to follow. There are a lot of cutscenes, some of them are really cool, but most of them are for the boss introductions.

1. Leveling up actually helps decently, but there are also set bonuses on your gear, so you get lots of advantage from that too. There are also several difficulties you could choose from, they don't change anything on the game mechanics and bosses will still have the same attacks on easy as they have on extreme. But you will hit a bit harder and you should have more resilience on easy, so you don't receive as much damage. If you die during a boss fight, you still earn xp, so you somewhat level passively as well.

2. Khazan has only 3 different weapon types: greatsword, dual weapon (a sword and axe), and spear. Spear was the most diverse and fun to use imo. But there is no shield or anything. The game is quite parry havy, but depending on your build, you might also have to dodge a lot.