1.
Without being an expert in the field I'd say that most seem to think that the free encoder/decoder
LAME is the best one right now for good quality mp3 rips.
AFAIK, fraunhofer made the original algorithms for the mp3 codec, but I don't know how involved they are today with developing their codec.
2.
You can rip CDs with many applications. It all depends on what suits you in terms of convenience or demand of quality. There are rippers in many music players like winamp, foobar2000, iTunes and also stand alone rippers like EAC. Another, commerical app, is dbPowerAmp, which is a very capable ripper, and has a suite of accompanying programs including a music player.
I use EAC in secure mode to ensure that I get as good a replication of the original media as possible, but that is overkill for many since ripping that way takes a bit longer than the burst method employed by other rippers.
3.
I am not familiar enough with iTunes to know the answer to that, but the only thing I can think of offhand is that it employs some sort of normalising. Maybe there is a setting to disable that if you look through the configuration options for iTunes.