1. The second coat was applied cross grained and has drastic streaks and lap marks. Do I need to 100% remove these marks before applying the third coat? I have sanded them with 100, 150, 220 and have removed 80% of the 'ridges' created by the marks. Will additional coats hide this or do need to go back and hit it with the sander again? I am using a palm sander and 5" DA sander.
They should be sanded out. If I were facing this situation, I would use my buffer and a used 100 screen and screen the floors down till the finish was smooth. Then I would buff it again with a 3M SPP maroon pad to remove any screen marks.
2. Flaws in the wood add character, flaws in the finish look like poor workmanship. I am considering using the rest of the Varathane to complete the 3 base coat, sand with 220, then roller the top coat with Fabulon or Parks OMU. How long must I wait prior to top coating with a different brand product?
You already know that VOC Varathane is difficult to work with. Why bother? Just go with the Fabulon now. As long as both products are OMU and the previous coat is thoroughly dry, you should have no problems switching finishes.
3. If the answer to #2 is more than a couple of days, can I thin out the Varathane to get it to flow better for the finish coat? How much thinner to add per gallon? I am not trying to rush the results, but it's tough living in your dinining room for weeks with furniture piled all over the place. I really can't wait weeks for a cure then top coat.
I can't speak for your location but my understanding is that with VOC compliant finishes, it breaks some law(s) if one thins them with thinners. But how are the authorities to know? So I'll not speak about the legality of it but the practical aspect. Yes, you could probably add a small amount of solvents to aid in flow and dry time. Which type and amount are variable. But if you just switched to the professional type of finish, the type you're friend warned you against (?), you won't need to concern yourself about thinning out some ultra thick, won't dry, big box store "floor finish".
On to the finishing. The Varathane OMU was recommended to me by a store associate (yeah, I should have known better). Months ago, when I did some research, I was going to choose a Bona product, but a friend in the finishing chemical industry told me to stay away from the pro chems and stick with store bought OMU. At any rate, the sludge is nearly impossible to work with.
This says it all. You are listening to the wrong advice. Why do pros use pro products? Because they need products that are dependable and they can rely on. Fabulon, BONA Woodline OMU, Dura Seal OMU are all pro level products and you should not have the type of problems you have experienced before.