It is probably not in your best interest. You should get your own attorney and get their advise on what your next course of action should be. At this point it is litigious.
Collectors sometimes work through a law firm to scare debtors. You can attempt negotiations to settle, though you will be expected to pay the legal costs incurred.
Yes. You can still negotiate the debt but the settlement may be with someone else or you may need to go to court anyway but show there is a settlement.