1- Deeper then your cable is long.
Honestly I don't know of anyone using the SS 3D on a towfish, but its predecessors LSS-1 and LSS-2 have been used on several DIY-versions. I see no reason why SS 3D should not withstand the same pressure.
2- I don't know of an extensioncable for the SS 3D. Contact Navico, you might be able to use two cables for LSS-2. You would offcourse have to make the connection waterproof.
The imagequality gets a lot better just a few feet down, as the main problem is turbulence made by the boat and waves. I made i towfish for my Humminbird back in the days, and just by lowering it 5-6 feet down the effektive range was more or less doubled. (Unfortunately I don't have any pics to share here, that time was at least a couple of PC-crashes ago.)
I use Reefmaster as this copes well with both Lowrance/ Simrad and Humminbird sonarlogs. (Just do not log in the SL3-format, SL2 does everything you need.) It is also rather ressonably priced compared to other options.