1) You are able to use your Magic Projection in place of defence IF you have already, or are able to immediately, cast a defensive spell.
2) This question I can understand your confusion, as the passage has a mistake in it. The example is actually right.
Eg. If you have accumulated 50 Zeon, and suffer an attack with a Final Damage of 60. You must make a Withstand Pain check with a Difficulty of 120. If you fail the check with a result between 60-119, then you loose those 50 accumulated points of Zeon, however, they do go back into your Zeon pool and can be accumulated again. If you failed the check with a result of 59 or less, then not only do you loose those 50 accumulated points of Zeon, but they do not go back into your Zeon pool, and need to be recovered. Ie. They act as though they have been spent. (Remember we discussed Spent points back when talking about Ki.
3) This one is a little tricky, and personally I feel that it might take me a while for you to understand it, but here goes. For this lesson and example, I will be using the Incinerate spell, which is the Level 60 Spell of the Path of Fire, and can be found on the page 145.
Now in the description of Fire Ball you can see under a label of Maximum Zeon that is says "Intelligence x10". What this means is that maximum amount of Zeon your character can spend casting this spell is your character's Intteligence characteristic times 10. For example if your character has an Intelligence of 5, then the mazimum amount of Zeon they can spend while casting that spell is 50 Zeon. Which in this case is well below the Base casting cost of the actual spell. What that means is that even if your chracter had invested 60 Magic Levels in the Path of Fire and thus technically knew how to cast the Incinerate spell, they would be unable to actually cast that spell. However once their Intelligence increased to a high enough value to allow your character to spend enough Zeon equal to the Base casting cost of the spell, in this case they would need to have a Intelligence of at least 10, then they are able to cast that spell whenever they so wish.