Here are your answers:
1. Yes, you can do this, and can even install Ubuntu (and every other Linux distribution) alongside Windows.
2. The erase drive option does erase the entire drive and all contents on it. This includes partitions, files, etc. You will not get an NTFS partition, however; rather, you will get an EXT4 partition. The ext4 or fourth extended filesystem is a journaling file system for Linux, developed as the successor to ext3. ext3, or third extended filesystem, is a journaled file system that is commonly used by the Linux kernel. It is the default file system for many popular Linux distributions. Stephen Tweedie first revealed that he was working on extending ext2 in Journaling the Linux ext2fs Filesystem in a 1998 paper, and later in a February 1999 kernel mailing list posting. The filesystem was merged with the mainline Linux kernel in November 2001 from 2.4.15 onward. Its main advantage over ext2 is journaling, which improves reliability and eliminates the need to check the file system after an unclean shutdown. Its successor is ext4. The ext2 or second extended filesystem is a file system for the Linux kernel. It was initially designed by Rémy Card as a replacement for the extended file system (ext). Having been designed according to the same principles as the Berkeley Fast File System from BSD, it was the first commercial-grade filesystem for Linux. Finally, The extended file system, or ext, was implemented in April 1992 as the first file system created specifically for the Linux kernel. It has metadata structure inspired by the traditional Unix File System (UFS) and was designed by Rémy Card to overcome certain limitations of the MINIX file system. It was the first implementation that used the virtual file system (VFS), for which support was added in the Linux kernel in version 0.96c, and it could handle file systems up to 2 gigabytes (GB) in size. ext was the first in the series of extended file systems. It was immediately superseded by both ext2 and xiafs, which competed for a time, but ext2 won because of its long-term viability: ext2 remedied issues with ext, such as the immutability of inodes and fragmentation.
3. Yes, you can do this, however you will need to use advanced (and, if you are not careful, dangerous) partitioning methods to do this.