1.) I think we're seeing in Frodo the same reluctance to give up the Ring
that we saw with Bilbo in the first chapter of Book I. Much of what is in
this chapter consciously picks up on things in that chapter -- including the
reluctance of a Hobbit (once Bilbo, now Frodo) to give up the Ring.
2.) Galadriel explains it this way: "As Ring-bearer and as one that has
borne it on finger and seen that which is hidden, your sight is grown
keener." Yes, in part I think he is seeing Bilbo "twisted" by the desire
for the Ring.
3.) I'd say Bilbo's vision was clouded by desire for the Ring; and that
is why he instinctively passed his hand over his eyes as his thoughts became
clear
again.
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All that is gold does not glitter,
Not all those who wander are lost;
The old that is strong does not wither,
Deep roots are not reached by the frost.
From the ashes a fire shall be woken,
A light from the shadows shall spring;
Renewed shall be blade that was broken,
The crownless again shall be king.
