1st question- does the attacking Air formation know the altitudes and numbers of the Japanese cap?
7.13 Observing Planes.
When the observing unit does not have radar, planes’ altitudes are revealed only when the Condition Number is 3, or at the beginning of any type of Air Combat. When the observing unit has radar, the Condition is 1 or 2, and the observed units include planes at high altitude, the observing player is told only that there are planes at high altitude (he is not told whether there are planes at low altitude as well or how many planes are at each altitude). When the Condition Number is 3, the observing player is told the exact number and class of each plane at each altitude.
I think the attacking aircraft have to roll for observation, and determine what the condition number is. In theory, that could be done in the hex where combat is occurring, which would likely give a condition of 3 in most situations.
I think this is the answer to the second question as well. In a game mastered game, the GM could give out information as it became available and the planes closed in, but in a regular two player game, the observing has to occur at the 'time snap' when it is checked.
3rd question: I won't quote the whole rule here, because it's pretty long, but Rule 14.13 Special Interception (Air-to-Air) Combat During Movement covers this, I think.
14.13.3 In both 14.13.1 and 14.13.2, only opposing planes at the same altitude may intercept or be intercepted.
Some of the CAP rules are optional/advanced and aren't actually part of the official rules, but can be found in the Optional Rules supplement/compilation. (If you don't have this file, PM me with email address and I'll get a copy to you.)
These are unofficial:
1. Ready CAP represents planes which are on the ground or CV in alert condition. These
planes may take-off to intercept only in the hex in which they are located. The number of planes
which may be launched and the altitude which they may attain is dependent upon the amount of
warning available from the incoming strike. Orders for ready CAP should give the GM the size of
the attacking formation needed to trigger a reaction. A player might be willing to take his lumps
from two incoming planes but would want to react to a force of ten.
1.1. Ready CAP may consist of only regular interceptors.
1.2. The Ready CAP Table (below) gives launch capacity as a factor of warning versus desired launch altitude.
1.3. The GM will form the ready CAP aircraft which are available to launch into an AF and resolve combat as normal interception.
1.4. To prevent overuse, ready CAP may only be used during daylight hours.
1.5. Players should realize that ready CAP is two faced. If a small strike triggers interceptors, a large strike 3 turns later may find those same interceptors on the ground readying & unable to respond when needed.
[Table of intercept altitudes]
1. CAP cannot normally change altitudes to intercept an incoming strike. The following
modification allows a HI level CAP to intercept a LOW level strike.
1.1 If a CAP AF is at HI altitude and all incoming strikes for the turn are at LOW level a portion of the CAP may dive down & intercept the incoming strike.
1.2 If a CAP AF at HI altitude has a 3-1 superiority in Air Factors over all incoming HI level strikes, the CAP AF m AF may split.
Those are all unofficial, and intended to be used in GM'd game, but you can adapt them as needed.