When a player makes a foul shot the incoming player gets some points (typically 4, more if the shot involved the blue, the pink or the black) and he has some options:
a) if it was called a miss, he can say to the ref to move the balls to their original position and make the other player shoot again
b) make the other player shoot from where the cue ball ended up
c) play himself from where the cue ball ended up.
If after a foul the cue ball ended up in a spot where you can't see a red fully (both extreme edges of the red ball) the ref will call a free ball. In a free ball situation the incoming player has the option to shoot at a color as if it was a red ball.
For example, player A plays safe. Player B makes a foul shot and leaves the cue ball in a place where player A can't see a red ball fully. Ref calls a free ball. Player A gets 4 points from the foul and chooses to play the free ball. He pots the blue (or the pink, or the black, it doesn't matter) and it counts as 1 point. The ball gets respotted and player A continues the break normally, playing a color (that counts normally this time).
As for your second question, i don't know. I do know that the shots on the colors are nominated. You can't say that you'll shoot the yellow and hit the green, it's a foul. So it's a weird situation, because you don't have to call which red you're going for, but you have to say which color you're going for..