Good question Dennis. I'm far, far from an expert but that's never stopped me before from giving an opinion.
So I'll try to answer your questions from the perspective of a long-time collector.
1. The color variations that give rise to the names green bone or red bone are generally existent across the handles, not just limited to the edges or ends near the bolsters, or the un-jigged areas.
2. In my experience the terms green bone and red bone originated with collectors in reference to describing Case knives. It has since spread somewhat to other brands but when I hear the terms, my mind immediately goes to Case. Maybe not the same with newer collectors.
3 and 4. As related to green bone, I think of older knives, either Tested or early XX era. Case "green bone" of that era isn't green like grass or tree leaves. It's a more brownish or tan color with a hint of olive green in it. Hard to describe but after seeing it a few times in hand, you'll know it when you see it again. I find it also difficult to photograph accurately due to variations introduced by lighting used in the photography. The same applies generally to "red bone" but as others have pointed out its more subjective and there seems to be more different opinions about it.
5. For whatever reasons collectors have put higher value on old green bone and red bone knives. Sellers have sought to take advantage of that, hence the spread of the terms to other brands and taking liberties with describing all kinds of knives as being green bone or red bone. Caveat emptor!
Here's a picture I took recently of some Case 06267s from across different eras that show color variations. They are, top to bottom, an early USA (1966-ish) reddish bone (not considered "red bone" due to wrong era), a XX era typical bone (not red bone or green bone, cuz it's not red or green), a Tested era rough black, and a Tested era green bone.