I don't think you need to kill every mudukon and fuzzle, but you have to kill as many as possible. It's like the super bad endings in Abe's Oddysee and Exoddus, it's impossible to kill everything.
I'm not sure, but mudokon natives seem to affect your quarma, too, however it might just be for the halo that appears above Abe's or Munch's head. I.E. In the Spoocegrub Forest (second level of MO) if you kill all the mudokon natives after you've used them and don't resurrect them, you get the red jagged halo above Abe's head.
As for question two, I have no idea, I guess it's just one those things that makes Oddworld odd!
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I'LL GET MAH STABBIN KNIFE!
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