Question 2: When a block with a hole in it is heated, why does not material around the hole expand into the hole and make it small?
Almost all bodies expand when heated. Their molecules get more K.E. In case of solids, the amplitude of vibrations of the atoms increases about their mean positions. This increases the volume of the solids. With such an increase in the volume, the atoms around the hole are pulled outward which further increases the area of the hole.
We can imagine it as the hole behaves like part of the solid and with the expansion of solid, the hole in it also expands.