Short answer: Yes
The point of the passport process is to identify with the State Department that you have changed your status, and that they need to update the background information on your passport as such.
When handing in the passport application, you are doing 2 things.
If you have a valid passport, or it has expired within less than 5 years, We recommend you fill out the passport form DS-64 "Lost or Stolen Passport". If you try to surrender your expired passport, they will try to push the DS-82, the passport renewal application. They may even get pushy and say they wont accept a DS-11, or that the DS-82 will save you money. The problem with the DS-82 is they leave all checkboxes off of stating you are not a U.S. Citizen. So by filling this out, they will assume you are.
Also, if your passport is currently valid, and you try to surrender it, they will just get confused, and push back on you. Again, in this scenario, we recommend you claim it is lost with the DS-64 form.
Since you have lived in the country for 7 years, you are considered naturalized.
No. Those will not change
No, you have earned those. Those will not change
Any notary can sign and stamp your documents. The notary language on the document is what determines what type your notary is.