On the last question, I am not sure how good you are at the representation theory, but the following fact is true: take so(d,2) (we need so(3,2) for this work), use the conformal base, i.e. <PERSON> generators $L_{ab}$, translations $P_a$, conformal boosts $K_a$ and dilatation $D$, $a,b=1..d$. $P$ and $K$ behave as raising/lowering generators with respect to $D$, $[D,P]=+P$, $[D,K]=-K$. Take the vacuum to carry a spin-s representation of the Lorentz algebra and a weight $\Delta$ with respect to $D$, i.e. $|\Delta\rangle^{a_1...a_s}$. When $\Delta=d+s-2$, there is a singular vector, $P_m|\Delta\rangle^{ma_2...a_s}$. This is a standard representation theory: finding raising/lowering operators, defining vacuum, looking for singular vectors. Actually, singular vectors are exactly the conformally-invariant equations one can impose.
On the field language this means that $\partial_m J^{m a_2...a_s}=0$ is a conformally invariant equation iff the conformal dimension of $J$ is $\Delta=d+s-2$. Despite the fact that $J^{a_1...a_s}$ is a good conformal operator for any value of the conformal dimension, only for $d+s-2$ its divergence decouples. (Perhaps you have seen $L_{-2}+\alpha L_{-1}^2$ as a singular vector in the Virasoro algebra, now it is replaced with $P_m$ or $\partial_m$).
Now, having $J^{a_1..a_s}$ of weight $\Delta$ we can consider its contragradient representation or on the field language couple it via $\int \phi_{a_1..a_s}J^{a_1...a_s}$ to some other field $\phi$. 364
That we need a conformally invariant coupling implies $\Delta_\phi=d-\Delta_J=s-2$. Not surprisingly something special must happen for $\Delta_J=d+s-2$.
$$\int (\phi_{a_1...a_s}+\partial_{a_1}\xi_{a_2...a_s})J^{a_1...a_s}=\int \phi J-\int \phi_{a_1...a_s}\partial_m J^{ma_2..a_s}=\int \phi J$$ we see that a statement that is dual to the conservation of $J$ is the gauge invariance of $\phi$.
I have not read the paper yet, but as far as I can see they play with the dimension of $J$ and for $d+s-2$ and $2-s$ it describes a conserved tensor and a gauge field just because of representation theory of the conformal group (decoupling of certain null states). At any given moment of time in the paper $J$ has some fixed dimension and is either a conserved tensor, a gauge field or just a spin-s conformal field of generic dimension $\Delta$.
On the last but one, you are right in that gauge invariance has a little to do with conformallity. The answer is spin and dimension dependent. For $s=0$ there is $m^2$ for which the scalar is conformal. For $s=1$ and certain $m^2$ the <PERSON> field is a gauge field but the <PERSON> equation is conformal in $d=4$ only. Beyond $d=4$ a gauge spin-one field is not conformal, or a spin-one conformal field is not a gauge field. For $s\geq2$ the situation is even more tricky: in $AdS_4$ the gauge fields are conformal, but in <PERSON> space they are not conformal (in terms of gauge potentials $\phi_{\mu_1...\mu_s}$). You may have a look at http://arxiv.org/abs/0707.1085
On the second, first of all the transversality is on the right place in 5.1. Secondly, your confusion (inspired by my answer to another question) is that there are two different classes of fields people are interested in. 364