1. It does not compensate for any image distortion.
To clarify what "distortion" means. It does not refer to the shape of stars across the field. It refers to the position of stars from center to edge of the field. Some optical systems have different focal length between the center of the field versus the edge of the field. This can displace the stars at the edges either inward (barrel distortion) or outward (pincushion distortion). Any plate solve program that does not account for this can have substantial errors.