1. You should be able to get it credited back to your card.
2. No (see 3 below)
3. AFAIK, you cannot upgrade on AF using FD miles
4. KLM
So, 3 is the real killer for you as far as business class travel is concerned.
You may also want to check whether KL fares have decreased and what availability for upgrading those flights is like. If the issue for the high fares is availability, you might want to try EWR as well.
50K for a UK-JFK might perhaps not the best use of miles but this is your call.