Question 1#: well, I'm not completely sure if they can transform, but here is what I think: neutral chaos can't transform, but you can make them look
Like Shadow, and Sonic (I heard Knuckles too). If you want to know how, ifs all over Google.

Question 2#: Again im not sure. But this is what I think: Usually the color on their head has to do with their favorite type character. ( dark, hero). if you want him to it to be hero, use him with just one hero character, and not all the hero characters. Such as just use sonic, and not all the others, or vise virus. likewise with dark chao. you can tell who is their favorite if you whistle, cause they will come to you. (press Y to flip through the B actions). as for your Grey dot, I think it's because your mixing up and using so many characters, which is not good for the chao. Which just means he is confused or he's been used by so many characters. That, or he is just old.

PS:If you don't want him to like a character, jump and throw him with that character. To get a chao to like a character, use ONLY that character, give him lots of animals and chaos shards, (those things in robots) and pet him ALL the time. Briefly, just give him lots of attention.

If you are upgrading a chaos stats, here is a list of the best courses for certain skills:

Swimming. Power. Flying. Running. All Four
Metal Harbor. Pyramid Break. Metal Harbor. Radical Highway Dry Lagoon
Radical Highway. Sky Rail. Dry Lagoon. Pumpkin Hill

If you are new to the chao world, I suggest you don't use skunks, rabbits, raccoons, or sheep.
Here is a list of all twenty-one animals:

Power: Flying: Swimming: Running: All Four:
Bear. Peacock. Penguin. Cheetah. Dragon
Boar. Phoenix. Seal. Tiger. Unicorn
Gorilla. Bat. Otter. Half-fish (Green alien)
Skeleton Dog. Parrot. Condor (Gold bird)

ADVICE: If you want better appearance on your chao, go get a lot of bats on Pumpkin Hill (Bats
Also take away their feet. Chaos don't trip nearly as much is races if they don't have feet. No feet
Will not reduce his/her running speed.) Also, after all the animals you give chaos, they start to get
Kind of ugly. I suggest you give them a eggshell if you have one.

dude um those are the basics i think alot of pepole or all pepole who have that game know about that so here i go there is 2 more gardens the dark gardan and the hero garden you can unlock them by envovling your chao into a dark or good chao you envolve the dark by geting egg man rouge or shadow and giving it lots of love the plenty of chaos drives or animals and most important dark fruits you can get them at the black market (at the kindergarden. for a hero chao get sonic knuckles or tail give them love,chaos drives,maybe animales(if you want him to look weird)and hero fruits and by doing that youll get the 2 gardens you can make them have an egg by buying a heart fruit
(black market at the kindergarten) glad to help other guy toyr helpful too but those are the basics those are easy sorry

Help! My Chao won't reincarnate/transform a second time!!! I've waited for it to transform for 3 hours now. Roxy (the chao I'm talking about) is now 4. Will she reincarnate soon?