Hi, thanks for posting this.

> How does combat happen? Does all caravan members fight, or one only?
All members with more than 1 HP participate (except Leader and Hadid).

> I get boosting items, should I use them on the stronger or weakest member?
There are no disadvantages to using it, so use it on any member you like.

> Is there any point in keeping members after their chain is gone? Or should I release ASAP?
Under the current system, there is no point in leaving members who have broken the chain. Basically, it is a good idea to liberate them, as there is something to be gained by liberating them.
Some players keep some of the stronger members or those they like.