No, I believe the system ignores the fact that they are dead when they leave. They keep getting EXP. All characters that come back have full HP/MP, but I dunno if they are stored away as dead though (not that it mattered).
Yeah, I think that's right. The check for deceased characters is only for ones in your party.
I figured it out with Rosa. Some times she'd come back knowing Cure3, sometimes she wouldn't. I sucked at the game back then, and had trouble beating Valvalis without it, so I figured out how she gained it pretty quickly by leveling in the tower. The reason they did it is pretty obvious; it stops you from leveling Kain to 50 before Mist, and getting him back around 30.
He'd still come back at 50, since it stores the character's current level. What would have been bad is if he had left after Mist at level 2 or whatever, then come back at that level when you regain him the first time.

Now that I think about it, after knowing how the shadowing routine works, I'm not sure how I could have thought characters
didn't get experience, for that very reason.

You should document that piece of code, in case anyone else wants to utilize it.
The experience/leveling part of the battle finishing routine is from 1EE58-1F213 (FF2us ROM with header). At 1EFE6 the ASM data is "C9 0A" -- the "0A" is used to repeat ten times, marking which party and shadow slots have characters in them, and storing them in the ten addresses from $405F-4068. I changed the "C9 0A" instruction to "C9 05", which will then only mark slots for characters in your party.
Since you moved things around, I'm guessing you've documented more about the shadow party data? I remember you mentioning before than you didn't know how the game knew when to store stats there, and for who. I've been trying to plan around that limitation, and it's kind of halted all progress on my game, since I don't have a solid idea of who I want in the final party yet. (On the plus side, it stopped me from being an asshole and stealing all possible items obtained when you get thrown in prison fairly early on... I didn't want to waste instances of the two characters you have on prisoner gear.)
Well, I did figure out how the game knows who and when to store data for. It's described in
this post. It sounds like that won't help you, though, if you don't know who you want in your final party. I'm still working on getting my shadowing routine to work right. Bugs like the one I fixed today seem to keep cropping up. I'll definitely post it, though, once it's actually in a working form.