1 - When you say claimed annually do you mean cash in part of the bond?
2 - These are meant as safe/guaranteed investments. Like instead of parking in a CD your return is better here.
1 - No. It seems like you can choose when to recognize the interest and pay taxes on it, default is upon redemption, which could be a larger chunk, and sometimes put you in a higher bracket and potentially other effects. I look it at like throwing a dart in the dark. Ideologically I would probably prefer to be taxed as I go (which makes sense since there's no state and local tax), but I know most would prefer to defer.
2 - I am well aware of the safe/guaranteed investment vehicle. My preferred vehicle for that is Paid-up-additions on Whole Life Insurance. There's a sales charge going in, but after that, I think the overall profile is better. It is obviously not as simple as I-bonds, as it requires an underlying Whole Life contract that will allow for the Paid-Up Additions.