Dear Vladimir:
First of all, just in case you're interested (since you mentioned the quote; and since it's so relevant to the aim of this particular essay contest), here's a more complete exerpt from Einstein's (1916) tribute to Mach:
``But how does it happen anyway, that a properly endowed natural scientist comes to concern himself with epistemology? Is there not more valuable work in his own trade? I hear some of my colleagues saying this, or sense from many more that they feel this way. I can not share this attitude. When I think about the ablest students I have encountered in my teaching, viz. those who distinguish themselves through independence of judgment, and not through sheer agility only, so I state of them that they had a lively interest in epistemology. They gladly entered into discussions about the aims and methods of the sciences, and showed unequivocally, through persistence in advocating their views, that the subject seemed important to them. In truth, this is not surprising.
``If I am not ambitious for external reasons, such as making money, and also not, or at least not exclusively, the sporting pleasure, or delight in brain-gymnastics due to a scientific turning, then, as a disciple of this science, I must have a burning interest in the question: What possible goal does the science want to reach, to which I dedicate myself? To what extent are its general results `true'? What is essential, which is based solely on accidents of development?
``... Concepts which have proven useful in ordering things, easily attain such an authority over us that we forget their Earthly origins and accept them as unalterable facts. They are then branded as `necessities of thought', `a priori givens', etc. The path of scientific advance is often made impassable for a long time through such errors. It is therefore by no means an idle trifling, if we become practiced in analysing the long-familiar concepts, and show upon which circumstances their justification and applicability depend, as they have grown up, individually, from the facts of experience. For through this, their all-too-great Authority will be broken. They will be removed, if they cannot be properly legitimated, corrected, if their correlation to given things was far too careless, or replaced by others, if we see a new system that can be established, that we prefer for whatever reasons.
``This type of analysis appears to the scholars, whose gaze is directed more at the particulars, most superfluous, splayed, and at times even ridiculous. The situation changes, however, when one of the habitually used concepts should be replaced by a sharper one, because the development of the science in question demanded it. Then, those who are faced with the fact that their own concepts do not proceed cleanly raise energetic protest and complain of revolutionary threats to their most sacred possessions. In this cry, then, mix the voices of those philosophers who believe those concepts cannot be done without, because they had them in their little treasure chest of the `absolute', the `a priori', or classified in just such a way that they had proclaimed the principle of immutability.''
Anyway, I also wanted to clarify a couple of things regarding your comment. I don't think we need to do away with SRT and start anew: the theory provides an accurate description of phenomena which can't be ignored just because we're uncomfortable with some of its logical consequences. In this respect, Einstein remained steadfast to his theory of 1905 and the definition of simultaneity he expounded there, as he said only two weeks before he died, ``To us believing physicists the distinction between past, present, and future has only the significance of a stubborn illusion'', which is now a well-known logical consequence of his definition.
However, I do feel very strongly that we need to insist upon a logical reduction of SRT, through a non-operational definition of simultaneity which is more consistent with what we know from cosmology, and which admits a description that is more like the common-sense perception of time's passage. This is what I've argued for in my essay. According to the description I've given, neither should clocks (or time) actually slow down, nor should lengths (or space) really contract, but things should be perceived as such when synchronous events are not actually simultaneous. If you do have another chance to read (or listen to) my essay, I hope you'll find this helpful, as I've tried there to reconcile the physical description from SRT with a presentist description of time that's just like what you described in Q2 in your essay.
In any case, thanks very much for taking the time to read my essay and commenting on it. When I'm able to read through yours in full, I'll leave a comment for you there.
Best,
Daryl