Ill take the internal politics part then
The Tory Leadership
Howe would probably stand, Heseltine would definitely and Pym or Gilmour might stand as the standardbearer of the arch Wets.
Tebbit wouldn't because of his injuries - that's if he survives at all - and then wanting to care for his wife like OTL
Whitelaw was in the Lords by now, so not a realistic possibility
Lawson might stand, but he wasn't particularly popular within the party at this point (it was only in 1986-88 with the full effects of the economic recovery becoming apparent that he came to be seen as a likely future leader). Brittan may have stood, but I wouldn't say it would be likely.
In a Howe-Hezza-Pym leadership race, id say Hezza would win. Pym/Gilmour is going to poll badly on the first ballot, and in a Howe-Heseltine runoff Hezza would almost certainly win.
It would be interesting to see a Heseltine-Lawson relationship emerging in the same way of the Blair-Brown relationship, in OTL 1990 Lawson backed Heseltine, partly because it was likely he would be rewarded with his old job.
A Heseltine premiership wouldn't be massively different from Thatcher's, he was a believer in privatisation, being tough with the unions, but he would be more willing to take a tougher line with South Africa, and he would never make the disastrous choice on the poll tax, and Britain would probably have joined the ERM in 1985 with very little cabinet dissent.
Heseltine's political instincts would probably be in favour of an early election and winning a mandate for himself, but at the same time the tories had a massive majority, and people don't like unnecessary elections, so id say he'd hang on until 1987 as OTL.
The miners strike would go on as OTL, but so would the economic recovery. If Hezza took on his same views on Westland as he held OTL then he might alienate some within his cabinet, but im not sure if it would result in resignations.
Heseltine might even do slightly better in the '87 election than Thatcher did, without the TBW factor, but I doubt it would make a major difference.
The 1987 parliament would be much more stable with an anti poll tax and pro European Prime Minister, its highly likely the tories would become the pro-business, pro free market, pro European socially liberal party that Howe dreamed of, after all without Thatcher acting as a right wing prophet its unlikely so many younger right wing MPs would become so Eurosceptic.
Heseltine might lead the tories into the 1991/92 election, but if he suffers the health problems he did OTL then its likely the pressures of office could result in a heart attack at some point during the 1987 parliament, and he would have to consider retirement. If his health keeps up then id say sometime around his 60th birthday in 1993, by which point he would be the longest serving PM of the 20th century.
Its virtually impossible that John Major would be anything more than a minor cabinet minister in this TL (if that), so Heseltine's successor might be Chris Patten, Kenneth Clarke, or possible even Nicholas Scott (under Heseltine he would likely have entered the cabinet and not turned to alcoholism).
If Hezza's successor was able to keep the tories in order, they might even have a shot at winning 1997, but who knows