IPhone – Problems with Group SMS

TL;DR
(1) Yes and (2) yes (but can be no depending on configuration).

1. If all the recipients are on iMessage, then it will be an entirely group thing. Everyone sees everyone, and everyone gets all replies.

2. If you have Group Messaging disabled under Settings.app > Messages > Group Messaging, then they will send as individual text - replies will be separate. If the carrier you are with doesn't provide group messaging there will be no option for Group Messaging. It is disabled by default.

Now, with the assumption that iMessage is on on your phone:

If you have Group Messaging disabled (or your carrier doesn't support it), then when you compose a text to two recipients (at least one off of iMessage) a thread, on your phone, called "OutGoing" will be created. It will then send out separate SMS messages to each user. Recipients won't be able to see who else you texted.

If you have Group Messaging enabled (note: MMS Messaging must be enabled for you to even see the "Group Messaging" option), and compose a text to two persons (at least one off of iMessage), then it will send a group text. Just like iMessage, everyone sees everyone, and everyone gets all replies. Again, the Group Messaging option will only be available if your carrier is compatible with the option. I believe AT&T and Verizon support Group Messaging. They may be the only ones.

Obviously, if everyone is on iMessage, like I stated above, everyone sees everyone, and everyone gets all replies.

If you send a group message on your iPhone, anyone else who uses iMessage will respond to the entire group. However, if a message recipient is using standard SMS (such as a user on an Android, etc.), their response will be a standard SMS message back to you.

So if you want a true group message, ensure everyone is using a Mac or iOS device, with iCloud and iMessage enabled. If you are in a mixed environment with non-iOS users, you might look at a third-party messaging app that works on all platforms.