1. If you ground the shield at both ends, it can and will conduct current. Even though the potential is low, large amounts of current can flow. With current flowing in the shield, you have magnetic fields inside the shield affecting the signal on the wires. By grounding the shield on one end or one place you set up a proper shield to capture EMI and RFI and ground it.
2. YES!!!
3. Your instrument earth is a gathering point for all instrument shields and instrument earth connections. You can take ONE large cable and connect the INSTRUMENT EARTH BUS to earth ground.