H1B extention 6th year and gap in employment

[alobo]

This is my situation -
1. H1-B (6th year) [Indian passport]. Visa expired in 2014 and I am currently on an extension. Note -  The extension was approved before I got the I-140 approval.
2. I-140 approved [Indian passport]
3. Received EU citizenship post extension and pre I-140 approval.

(1) I need to surrender my Indian passport, as I have recently acquired EU citizenship. I will need to amend my H1B for that. 
Question 1.a & 1.b - Since my I-140 is approved, can the H1B be extended for 3 years(1.a) at a go while I file for amendment or are they 2 separate processes(1.b)? My employer says the extension ties to the SOW and can be extended only 1 year at a time. (I am a fulltime employee on the payroll of a small employer)

(2) Question 2 - (future scenario) If my H1B is not extended, it expires and I leave the country, can I come back after a gap of time (say 1 yr) on the same old H1B since my I-140 is approved? Or do I need to file for a new H1B?

Do help even if its just your personal opinion