Great topic, Mahi!
1. Humour usually does make a narrative better... because if a book has absolutely no humour at all it might drag on in some places and if humourous scenes had been added there it might not have felt so dry.
2. It depends on what kind of tensed situation it is.. most of the time it humour does help to ease the tension a little but if the scene doesn't require the reader to lighten up a little then humour shouldn't be used there. For instance, take the chapter entitled Malfoy Manor from Harry Potter and the Deathly Hallows... if humour had been splashed there, it would have completely ruined it.
3. I usually do like witty and sarcastic characters.. but characters who are too sarcastic tend to put me off for some odd reason... a little bit of sarcasm is okay but not too much... i do enjoy witty conversations in books though :)