The first bug that you're claiming is actually how the product is supposed to work. It was designed to use the local root to define the site. You should have your local root set up to work the same way as on your server, so the paths will be written correctly.
If you set up the local path to emulate the server paths, then the paths will be written correctly in Site Sculptor as well.
I have tested having 2 dynamic submenus and have not run into the same issue. The mysql_free_result should be different for the two different dynamic menus, so there shouldn't be any conflict with the results being freed. the mysql_free_result doesn't free the database, just the results of the query. Can you zip up and attach the page you have your menu writer applied to as well as your CSSMenuWriter directory from your site? I'd like to take a look at the files to see what is being written out on your end.