1. Going by the setup in the book, the 5-4-3-2-1 setup of skills, before you could raise a skill a rank, you would have to take a new skill at 1 in order to be able to raise any of your other skills up a rank permanently. Is that right, or am I reading it wrong?
You need an equal or greater number of skills at N-1 than you have at N. So if you have 1 Superb, you need 1 Great, 1 Good, 1 Fair, and 1 Average to support it.
If you had 1 Superb, 2 Great, 3, Good, 4 Fair, and 5 average, then you could take a Fair right away if you had 2 skill points to spend -- that'd bring the Fair level up to equal numbers. It would have to be a new skill, since if you raised one of your Averages to be a Fair, then you'd have 5 fair, 4 average, and in order to have 5 fair you need 4 average.
However you slice it, if you want something to be Fair when you've got 5-4-3-2-1 you're gonna need 2 skill points to do it.
2. At minor milestones, you are able to change the rating of any two skills. Going by the reading in the book, you can have Lore at superb for when you are doing research, with combat skills at 1, and then switch them out for when you know you are having a combat session. I don't think that's the way it's supposed to be.
First off, how would you achieve that knowledge, that a combat session is coming up? Second off, why is your GM giving you sessions that don't involve both research and combat? Third off, combat should not take a full session unless your sessions are like an hour long; if they are that short, then a minor milestone should not occur after each session.
But otherwise, yes, you *could* do that, and yes, your GM *should* goose you for obviously trying to game the system rather than portray a believable evolution of your character.