I'll answer --- relatively short answers to each question:
(1) Yes, he stayed too long. Don't know an exact year he should have retired, but it was obvious by 2011 that he simply wasn't able to stand up to the rigors of being a Head Coach.
(2) At the very least, there was a pretty notable decline between the 2009-2010 seasons. I'm not a doctor, but the declinee was pretty alarming even from my view 400 miles away from State College. Joe's family was doing him a disservice if they didn't point that out himself.
(3) The Paternos aren't currently suing Penn State, except for this "nominal defendant" nonsense. As regards the NCAA, I don't think they will EVER drop that lawsuit. It is going the distance.
(4) No. It's not going back up anyway.
(5) Franklin has been disappointing thus far, but the book isn't completely written on him yet. Does need to get his first "big win" at Penn State. The Alligator Bowl against Georgia provides yet another opportunity.
(6) There's no doubt the Fina investigation was somewhat sloppy --- for example, getting the month AND year of the McQueary incident. Still, I think Sandusky was guilty, and it is correct that C/S/S were indicted.