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Answering only the basic part.
1. Selecting 'Only relevant values' is the right way to show the specific values related to the value selected in the filter.
2. When adding filter in the sheet make sure to select 'Use All'.
3. Sorry, not able to explore it as the workbook attached was created in a higher version, which I don't have.
Thanks for the help you were able to provide. What version are you working with? I can send a different file.