Hello Uma
1 - A shipping notification is a confirmation from the vendor that the material has been shipped.
2 - When you change your BOM or material master MRP settings, system automatically set a flag on the planning file to re-explode the BOM. Therefore, MRP automatically re-explode the BOM, even with planning mode 1. Planning mode 2 is only necessary when you need to force a new BOM explosion and I don't recommend you to use it frequently, as it may lead to performance issues. See my document MRP: Why shouldn’t I use planning mode 3 on a productive system? for more details.
3 - See notes 206666 MRP: Control parameters during planning and 135788 - Planning mode in material requirements planning.
4 - MRP does not create or change purchase orders or production orders. MRP can only create planned orders, purchase requisitions or schedule lines.
At last, I wrote the following document with links to the MRP FAQ notes, which may be helpful to you:
MRP: Frequently Asked Questions
BR
Caetano