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Because those positive yields are only available if you don't hedge your FX risk. Most institutional investors have a mandate to hedge FX risk and this will take UST returns for EUR investors negative.

Because you’re a European and have to pay your taxes (or your investors, or other people) in euros, so don’t want any exposure to the Euro/Dollar exchange rate.

https://en.wikipedia.org/wiki/Interest_rate_parity

Yes. The difference in interest rates implies that the EURUSD exchange rate is expected to rise (slowly) in the coming decades.

Diversification. Spreading your money across many governments which are unlikely to default is better than putting it all in one.

With diversification you decrease the risk of losing everything and increase the risk of losing something.

I think there are laws stating that certain kinds of German institutions must buy German bonds, but I'm not sure.