It is a relic of the past, where Microsoft intended developers to inherit all their custom exceptions from ApplicationException. Shortly after, they changed their mind and advised that custom exceptions should derive from the base Exception class.

Apparently. (Source: https://stackoverflow.com/questions/5685923/what-is-applicationexception-for-in-net)

Yes, yes and more yes. Even worse in co-op or MMO games where there's always one smug friend who does it first time while you're laying dead on the floor after your 32nd attempt...