1) Conditions are removed at the end of the defense phase.
rules, page 15 wrote:
At the end of the Defence Phase, resolve all Condition tokens on each
Enemy card and every Hero Charter. Regardless of the number and the
types of Condition tokens on any card or Hero Charter, remove exactly
1 Condition token from each Enemy card and each Hero Charter after
2) From the discard pile, if I remember correctly. I thought this was stated on the card - I don't have it in front of me.
3) Yes. Always reduced.