(a) I feel that the flavour of shallots (or garlic) develops better from being slowly roasted at a lowish temp vs frying, but it's just a tste preference thing really. The fried version should work just as well in practical terms.

(b) I often do use olive oil instead, but (thinking about it) I suppose I tend to reach for the butter if it's a plainish risotto where there isn't any veg being cooked in with it. Not sure why that would be: probably just the way I first learnt how.