Answer
(Fatwa: 145/141=D/1430)
Raising hands up to earlobes is proved from hadith. In Sahih Muslim, Malik bin Huwairith narrates: when the Messenger of Allah (صلی اللہ علیہ وسلم) would say Allahu Akbar he used to raise his hands up to ears. While the hadith of Wayil bin Hajr has been reported by Abu Dawood: The Prophet (صلی اللہ علیہ وسلم) raised his hands and they reached up to his shoulders and his two thumbs reached to the level of ears. (Page 121)
(2) Yes, it is sunnah as per the ahadith mentioned above.
(3) It is sunnah that the hands should be raised up to shoulders so that the thumbs reach to the level of earlobes:
رفع الیدین للتحریمۃ حذاء الأذنین للرجل حتی یحاذي بإبھامیہ أذنیہ (مراقي الفلاح)
Allah (Subhana Wa Ta’ala) knows Best
Darul Ifta,
Darul Uloom Deoband