To answer the first question, we can look at US launch failures over the past few decades, for which we have pretty good data. Drawing from the Futron Design Reliability report that looked at failures from 1984 through 2004, there were a total of six failures that were due to liquid rocket engines. Of the six, only one failure was caused by a rupture in the combustion chamber. The other five were either feedline problems or a failure to achieve or maintain full thrust.
Thrust and blocked/frozen feedline issues are no problem for a nine engine vehicle. All it would see is a slight decrease in total thrust, which might result in a slightly lower orbit than desired (if we were at maximum payload). This is definitely a significant advantage compared with a single engine vehicle that would almost certainly be out of luck.
Then there is the question of dealing with the comparatively rare case of a chamber rupture. To protect against this, Falcon 9 will have a blast shield protecting the entire base of the vehicle just above the gimbal joints of the engines. In addition, there will be fireproofed Kevlar fragment containment around each engine, similar to those present in jet engine nacelles. The explosive power of a liquid rocket chamber is actually not exceptionally high – it can be thought of as simply a small pressure vessel containing (in our case) 800 psi hot gas. During the development of Merlin, we saw several of what we refer to as RUD (rapid unscheduled disassembly) events and no fragments have ever penetrated more than 2mm of aluminum. Also, the direction of fragments is in a shallow downward cone away from the vehicle.
As additional measures of protection, all propellant and pneumatic lines have either pre-valves or check valves nested up high in the thrust structure. If anything happens to the engine, the flight computer is able to cut off all propellant and pressurant flow immediately.
"Given all of the above, I really believe we have a stage that has considerably higher propulsion reliability than a single engine vehicle."
Moreover, there are examples of multi-thrust chamber vehicles that have outstanding reliability. The Soyuz rocket, which has the longest flight history of any launch vehicle ever and a phenomenal safety record over the past few decades, is the primary form of human transportation to the Space Station. It has thirty-two thrust chambers on the first stage. The Saturn I, which had zero failures, was used for human transportation during the Apollo program. It had eight thrust chambers.