1a) Is there ever a reason you should NOT be producing Reserve Units that will be completed prior to all the war mongering in mid 1939?
It can make sense in case the units will have to serve as a police force. (to deal with uprisings in occupied territory etc.) Another reason might be that you want to have a first strike capability without mobilising before the declaration of war. This can make sense because if you mobilise, this can prompt other nations that feel threatened by you to also mobilise. So, if you have a bunch of units that are not reserves, you can declare war on a smaller neighbour without prior Mobilisation, or possibly on the day your neighbour decides to mobilise. Your full strength units can then brush aside enemy reserve units as they will be lower in strength and organisation until properly mobilised.
In the opposite, if you're playing a smaller nation, it could make sense to have a first line of defence made up of non-reserve units to avoid having to pre-emptively mobilise your forces when a dangerous neighbour starts banging the drums of war.
1b) I believe I am seeing that once a unit is created as a Reserve, it retains the Reserve ability (the exclamation mark) even when at full strength (Full Mobilization). If I am correct and they retain their Reserve status forever.., is there a downside to that?
Yes, indeed. There is no real downside to reserve status during the war. You will however loose manpower if you demobilise and later mobilise again for another war. This won't make the reserve units worse, but it could be a consideration if manpower is tight, and you believe that there will be a lull between two wars during which you want to demobilise. Of course, when your army is demobilised, full strength units suffer from more attrition, use more supplies, etc. The peacetime cost is definitely higher and depending on how long the time is between different mobilisation cycles it might not be worth it.
In my opinion there should be a button that lets you change the status of divisions from reserves to non-reserves etc. and the over-all cost benefit of building reserve divisions should be limited to the reduced attrition, upgrade cost, and supply consumption in peace-time. Then again, maybe that would lead to everyone just not building reserves at all to avoid having to even pick the right time to mobilise.
2) I had produced almost all Reserve units. When I Mobilized, I did not observe any sort of crushing cost in my Production (Upgrades or Reinforcements). Maybe I did not notice, but isn't Mobilizing supposed to cost you a lot of "stuff?"
Thanks.
If you have lots of reserve forces, mobilisation (or a change in conscription law) will result in a significant increase in Reinforcement cost. Note that this reinforcement cost is lower when mobilising from 'Service by Requirement' as you only have to top up the last 10% of your units. It is still substantially cheaper to build reserve units and then mobilise them than to build full strength units.
As your units gain in strength, you'll also notice supply consumption increasing, though this can be a bit less straightforward to notice as there is some latency in the supply system and your existing stockpile could be large enough for this to not become an issue until months, or even years into the war. (depending on the size of your army compared to the size of your supply stockpile)