1. Because that option means, that if the attachment is an image file, use it as the thumbnail. However this is a PDF file, so it won't work. As an alternative, on the General Options -> Image options panel, you can choose the post format icon as one of the alternative sources. In that case it will display the attachment icon: https://i.imgur.com/h3ksHdS.png
There is also a possibility to set a default image, if that fits better.
2. It is because for the media files the caption is stored as post excerpt, and the description is stored as post content – and by default the plugin is set to display the excerpt, if not exists, then the content. You can change that on the Advanced Options -> Content panel: https://i.imgur.com/8XzylIw.png
3. It's also because by default almost all HTML tags are stripped from the content for maximum compatibility. It's also adjustable on the same panel as before: https://i.imgur.com/R6jl30j.png
If you want lists and breaks to appear, use something like this as the exception values:
I hope this helps!Best,
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