No, it does not trace the exact flight path all the way back to the home point. Failsafe RTH backtracks for a limited time/distance in an attempt to regain contact with the controller. If it cannot then a normal (beeline at preset RTH altitude) RTH will be performed.
Yes, that's my understanding too.
The manual is not very clear on this IMO. It talks about a 10 second pause, without clarification.
I haven't known anyone to test this yet, but I think what occurs is when the craft loses signal, is stops motion like normal for 3 seconds, then goes into this new "SMART RTH", assuming no signal is regained. At this point the "SMART RTH" enables and the craft to retrace it's path backwards. But, everyone wants to know, how far does it retrace the path? The answer is, until a connection is re-established with the RC, up to 1min of travel (I think). Theoretically it shouldn't take very long for the craft to regain a connection with the RC if it retraces it's path, assuming the pilot hasn't moved. Then, when a signal is regained, the craft will stop for 10 seconds (interrupting RTH travel, per manual) and give the pilot the opportunity to retake control. The LED light on the RC will turn from RED to GREEN, indicating a link has been re-established. After 10 seconds being reconnected, if the pilot doesn't retake control, I think the craft makes a beeline for home from that point, like in the past. Since a link has been established during this beeline RTH, the pilot can take over control at any time.
What if a link isn't re-established during SMART RTH? I believe the craft will retrace is path for up to one minute (that's what I recall anyway), then if no connection is made during that 1 minute, the craft changes RTH mode and will make a straight beeline to home. What would be really SMART, would be for the craft to always enable OA in these scenarios (if OA is disabled during the flight), but we're not there yet.