1) Yes, you'll be asked to close one card. Also, Axis might reject your card without asking you to close one card. Check with CC team whether you can flip anycard to Airtel one without applying newly.
2) Yes, it's still very useful card.
Axis ace is just 0.5% cb better than Flipkart for offline transactions. and for bill payment Axis Airtel card is better than Ace. Dont worry. It's not that much of a dream card. I have all 3 and I use Airtel and Flipkart card more than the Ace.
last question//. Nope. I tried to get a LTF Myzone card in March as my 3rd card. Customer care was ready to give as a paid variant only. They refused to give as LTF and insisted me to apply online. It got rejected after 3-4 weeks.
I got rejected twice. Then tried after creating a savings account. Mainained 1 lakh balance (but only 5k mab required). Applied and got approved for the credit card.
So no one can say for sure. But if u get rejected without any reason once or twice, try opening account.