3) You cand do anything you want with the source code, but you have to keep the GPL license and this terms. Any derivated work must keep the terms in license.txt and license_agreement.txt
Although it is allowed by the GPL license, I still would not suggest you to this, because it is unfair to remove developer's links. I am a developer of a free wallpaper directory script, and I often get upset when I see that people remove my credits.