They can have sex if they want a natural conception, but most of the time it will be an 'artificial insemination' which involves the sperm donor handing over the sperm and then the surrogate inserting it into her cervix with a dropper.
Yes. Bear in mind that such can - and no doubt will - complicate the business relationship. And the potential couple needs to establish whether the work will still be paid for, or if this is now a...