The problem here is that the new theme kind of gets applied but not completely in all applications. For example, if you change the theme, the home screen icons don't necessarily change automatically but will change when you tap on them, which will be confusing. Also, if the theme changes things like status bar icons, the new icons won't be immediately taken into effect. There are various places in which the new theme won't be taken into effect automatically so it's better to just reboot. All this is caused by incomplete implementations of applications and is similar to why the device needs to be rebooted when the system language is changed. It's possible to change the system language on the fly but applications that won't react to the change properly will still use the previous language, so the easier way out (rebooting) was chosen.

Unfortunately not. I'm not entirely sure at this point if this would be possible or not. If yes, this is definitely something to be included. Also, if it would be possible to reset the theme to blanco if the device ends up in a reboot loop that would be also a thing to do.

The application is not actually targetting any folder. The only thing it does is checks which directories under /usr/share/themes contain valid MeeGo Touch themes and shows them in the theme selector. Base is excluded since the system won't work as expected if Base is chosen. The application does NOT replace any files from anywhere. That'd be a hack which is better left off for those who want to use hacks and know what they are doing. It should also be noted that the Nokia boot picture is first shown by the boot loader (and is embedded to the boot loader) and then by /usr/bin/MProgressIndicator. Thus, it's not possible to change the logo altogether, especially not without hacking.