That is perfectly normal as many dogs like to burrow under the covers for warmth. I would only see it being a problem if you were allergic to pet dander.
no it is not o.k. A dog will begin to not respect your space and see this as their sleeping place. It can be embarrassing if company will not come to your home for this reason. Make your dog understand were the boundaries are in the household. You will be glad you did later.
yes it is My Jackapoo does and we have no problem with it. I make sure she gets a bath every few days and a flea clollar and flea dipped regularly,but yeah under the covers is fine she probably likes it.