Uhm, yes that is how it is supposed to work. This is documented at the Apache web site under the Alias directive: http://httpd.apache.org/docs/1.3/mod/mod_alias.html#alias
Keep in mind that the url-path you see in a URL is not directly related to a filesystem path. The web server gets to interpret it different ways. It just so happens that for simple web sites one only needs to find files or directories relative to the document root ("web directory").
So what the Remap Sub-Dir option does it tell the server for a particular url-path to find files or directories relative to a different directory in the filesystem. As a result there would be no need to have a physical directory with the same name in the "web directory" at the same time as the Remap Sub-dir/Alias.
No with FTP. Each user would have to use SFTP/SSH. Also, there is no "regardless", all files and directories have a user and group ownership as well as permissions. The quick and dirty way is to share credentials of a single SFTP user. A lazy and less secure method would be some type of web-based file management solution. The advanced method would be to use UNIX groups - see http://wiki.dreamhost.com/Unix_File_Permissions_Cookbook#Recipe:_Setting_permissions_separately