Gark the Goblin
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1. Only "technically" - you take a penalty to attacks, but they take a penalty to AC. Attack penalty applies no matter who you're attacking.
2. Yep.
3. No rules I'm aware of for holding hands. "Probably," with the caveat that someone you're holding hands with is probably a Friend and would let you cast the spell on them without the attack roll (same goes for horse of course, if it's also allied).