Different War of Spanish Sucessor and they become a compromise candidate, maybe the idea of swaping bavaria lands for Austrian Netherlands/Burgundy would be included in the way.
Yes, he was. So if the young lad doesn't kick the bucket, then in 1700 when El Hechizado drops dead, we have a Wittelsbach Dynasty in Spain.
It's quite likely that he'd be José I, or possibly José-Ferdinando I, and would likely marry his Hapsburg cousin Maria Amalia when both are old enough.