Hello!
The answer should be the second sentence: Blowing wildly, the icy winter wind tore my woolen cap from my head, as it makes the most sense.
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The setting is the time and location of a story. (Where and when it takes place).
The first sentence definitely wouldn't improve improve the description in the setting of a story, nor would the last. The third sentence includes the location (basketball game), but does not describe it.
No they do not. Both could be wrong
It depends on the balloon. Some can only fit 1 person, others can fit up to 24. Most common though fit 3-5.