1) The Flame had splintered off from Lavos when he was about to land on Earth.
If you seriousally think Ayla is evolved, you have issues >.< *Points at her tail*
Those pre-histroic peolpe were "Apes". They only turned to "humans" apon coming in contact with the flame. It sped up their evolution, and allowed them to harness magic, that was just before Queen Zeals time.
2)The Flame can do many things with it's power. It heals the wounded with that power. It grants wishes *not literally* but bestowing that power upon the person. No real wish was ever granted in genie like terms, but it allowed people to make their own dreams come true (for instance Zealians getting infinite energy etc.)
In RD's case, the Flame responded to Schala's sadness and had her reincarnated to she could not have to suffer with her burdane.
Hey sometimes, I still think that it's possible that the Schala from the original timeline is Kid. If Schala used the power of the original flame to get her reincarnated, then it's possible that the Kid whom Lucca found was the original Schala. The pendant could have had her travel up the time stream, and since she appeared in 1004AD, it would have been after Crono and co. did their thing. That Kid may have been the one who time travelled to save Serge. And the Schala in Crono's timeline is in the DBT, and produced the Kid whom Serge travelled with. Oo