1. No, I don’t think you could read by the light of a single candle. There are various ways to add a reflective surface to increase candlepower, like polishing the inside lid of an altoids tin, cutting open a soda can, etc, but most would probably be clunky for the UL game. I’ve done a lot of messing around with that and generally I produce a very small light and an additional blurry small light, rather than any sort of significant accumulation of light.
2. Any sort of open flame is I think taboo in small enclosed spaces due to CO production and oxygen consumption, but in the hypothetical I would have a buffer between anything hot and a modern, one-spark-makes-a-hole material.
3. There is a sort of survival mode called a Palmer furnace; a ccf sit pad, a crinkle blanket or some sort of wrap, and a tea candle. You sit on the pad with your legs crossed, light the candle between your legs, and wrap your body with the emergency blanket (keeping your head out in the open for oxygen’s sake), which is purported to keep you alive in an emergency but probably not at all comfortable. For that reason you will often see a tea candle in ‘shcrafty survival kits, but I personally have never actually gone out and done it in harsh conditions.
I have used citronella tea candles under tarps in A-frame setup, so that there was plenty of ventilation and the candle sat directly on dirt, but I have never put a candle in an enclosed tent. If you are going to mess around with them, I highly recommend looking for beeswax candles. They last longer, smell better, and are just a step up in general than paraffin.