1. So what do you suggest? We have resistant touch screen so there will be always issue unless you just disabled it.
2. Yes it is.
3. Just indicate that proximity sensor is covered and screen it's locked.
4. You can configure it (edit qml file). Maybe I will add configuration via qsettings.
5. From the beginning the main assumption was don't act like a qtlockscreen/enhancedlockscreen so: don't show lock screen on off screen, don't use slow dialog window and don't ever try to rotate screen (it takes eons). I was rather thinking about meego like rotation (only qml part) but it require mce rotation polling - need test it. If you really want painful rotation I can add it.

What do you mean by convert to library? Be aware that I'm not c++/qml expert.