This is usually accompanied by the error described in Q1. It happens when your script has not returned a valid header. Specifically, the only required header is the 'Content-type'. Pee will not automatically print the HTTP headers for you. This is to maintain compatibility with existing scripts that are still using it.
Pee can write a copy of the compiled code to a scratch directory.
This is the best way to debug your PEE templates. Generally, you should not need to use them. They are used by the engine to compile and run PET files. As of version 1.03 it is recommended to use the Apache 'Action' directive to achieve the same thing.