Source Giant Hunter's Handbook pg. 21
Titan fighters make use of enormous weapons others can barely lift. Titan fighters have the following class features.
Giant Weapon Wielder (Ex): At 1st level, a titan fighter can wield two-handed melee weapons intended for creatures one size category larger than himself, treating them as two-handed weapons. He takes an additional –2 penalty on attack rolls when using an oversized two-handed weapon. This ability replaces the fighter’s 1st level bonus feat.
Incredible Heft (Ex): At 3rd level, a titan fighter becomes more skilled at wielding weapons intended for creatures one size category larger than himself. The penalty on attack rolls for using such weapons is reduced by 1, including when using oversized two-handed weapons. At 7th level and every 4 levels thereafter, this penalty is reduced by another 1 (minimum 0). This ability replaces armor training.
Unstoppable Momentum (Ex): At 5th level, a titan fighter gains a +1 bonus on combat maneuver checks and to CMD while wielding a weapon sized for a creature of a larger size category. At 9th level and every 4 levels thereafter, this bonus increases by 1. When wielding oversized weapons, the titan fighter can attempt to bull rush, drag, overrun, reposition, and trip creatures up to two sizes categories larger than himself. This ability replaces weapon training.
1.) -2 for inappropriate weapon, plus additional -2 for a total of -4 using 2H weapons one size category larger than themselves.
2.) When, let's say as a medium character, you are using a large sized 2H weapon, Incredible Heft reduces your -4 penalty by 1 to a new total of -3. This is reduced at levels 7/11/15 for another reduction of 1 each time, eventually completely removing your initial -4 penalty at level 15.
2a.) The ability Incredible Heft is only when using 2H weapon one size larger than the fighter. It does not remove any penalties for say, using an inappropriately sized dagger.
As I read it, it absolutely stacks. It's an increase by 4 not to 4.
The "too large for her size" bit should just be the usual inappropriate size penalty, just not applying if you use a smaller weapon for some reason.
So basically, when using a Large two-hander you start off with a -5 penalty at level 3, reduced to 0 when you reach lv 18.
Harsh.
The fighter, admittedly much more recent, starts off at -4 (and does so at level 1) down to 0 at lv 15.
In fact, when it came out I believe I remember people talking about dipping Titan Fighter to build Titan Maulers, for the ability to get big swords from the get-go, and both the smaller penalty of the fighter and the faster penalty reduction of the barbarian (down to 0 at lv13 if you start with 1 lv of fighter). It's been quite a while though, so I may be wrong on that.
Edit because I forgot to be clear on question 2 : the penalty reduction has to apply to the whole thing, or the archetype is useless. Massive Weapons are indeed too big for your size.
Penalties are hardly ever typed, for one. And pretty much always stack, as long as the source is different.
But more simply, Massive Weapons has no penalty of its own, it "merely" increases the existing one, as its text says.
I've tried to search the forums for past discussions, and all I can tell is that this is still every bit as much of a mess as it ever was.
I'm still unsure of the stacking of the two titan archetypes, and am once again comforted in the idea that it's decidedly not worth it either way.
I too am interested in a clearer answer, or a confirmation, as by the end of the week I'll be playing with one and I'd rather do whatever I can so that he doesn't gimp himself too badly.