You all gain xp, loot and advance in the story, but only in that save game that that the host has (that's for co-op). I don't see what the problem is if you are planning on playing it with your friends. What stops you from continuing that save later on together?
There's still no confirmation how it's done in online mulplayer mode, but I would imagine they are pretty much as the same as with co-op on same machine.
As to why change things towards easier to do? Porting the game to 3 different platforms is easier? Also you need to have some sense of realism. Obsidian and Square-Enix aren't making this game with the same infinite budget as Blizzard uses for it's games. Not to mention they are resurrecting an IP that wasn't a huge hit to begin with. If things go well with DS3 you might see more features added later on to the game via dlcs/expansions/sequels.
Companions, yes you can customize them as in you get to choose where to put their talent points etc.