Author's Response:
Oooh.....good questions!! I assume you watched "The Boy in the Box" series before this one, hence the good questions.
1) Yes....there are flashback sequences. Vivian Varne is not the mother, though she does have a striking resemblance. Lucas Horla did not die....it just looked that way.
2) That's not the mother, but good eye anyway.
3) No one really knows where Wendy is. Since the point of view is more first person, the intent is that you see what Shroud sees. So, to answer your question directly, it would appear that they never had Wendy, as you never see her anywhere in this episode.
Thanks for the questions....hope that helps a bit.
Best,
Rob