A. My understanding is that it will.
B. I don't think dropping the tables will recover any space, unless you had innodb_file_per_table=1 in my.ini when you created the tables. Unless this option is set, the only way to free space is to export everything from innodb, regenerate the ibdata file, and re-import everything.
C. It frees up space for innodb to store data, but the ibdata file doesn't shrink, so it doesn't free up space on the file system.
D. Not unless you had innodb_file_per_table=1 in my.ini. Also, dropping the database won't free space unless you have innodb_file_per_table set to 1.
Basically, if you don't want this problem in the future, you could export everything, set innodb_file_per_table to 1 in my.ini, regenerate the ibdata file, and import everything back in.