The word mistress during the Elizabethan era which was the time when Shakespeare wrote his plays had a very different meaning from the one we know nowadays.
A mistress was a high society woman, while people used to call master the men they also used to call mistress the women, so in this sonnet, he talks about his loved one as a woman with class and grace not a woman with a dubious reputation as we would think at first.
#1 the way they show there affection to each other and there relationship
#2 Malvio will succseed and this is because if he truley loves her nothing can stop him
I would go with option "A) Friend" the others don't really make any sense and they're both talking to eachother like they have been life long friends.