Creating the invoice from the Billable Time tab transfers the time/money from Work in progress to Accounts receivable. No need to write anything off. If the sales invoice becomes uncollectible, you would write it off just like any other invoice.
Yes.
Fees from work in progress is already an income account. No need to convert it to anything. As I said earlier in this thread:
Click on the blue Uninvoiced balance @Brucanna mentioned. You will be able to select entries for inclusion on a sales invoice. You also have the option to select billable expense items at the same time.