Don't be silly Liam we have every chance of getting Modric. Madrid might be a bigger draw, but they don't need him and he wouldn't even be a guaranteed starter, especially in the big games where Mourinho likes to tighten things up. He won't just play Alonso and Modric...
Whether we have the money is a seperate issue, but on the basis that we are constantly being linked with new players and some of the comments Gill has reputedly made then it seems the funds are there.
Fergie isn't an idiot and any fan of United can see we need to improve centre mid. So why are you doubtful we'll do just that? I guarantee Ferguson and Gill will have looked at plenty of central midfielders this transfer window, one of which will be Modric.
1) I can't say what he's thinking, nor can you nor anyone else, but on the balance of probability, I imagine he'd rather play for more money, with a better chance of trophies in a better climate if it meant playing ten less games a season. He wouldn't play in the cup games until the new year, possibly a couple of UCL away games, and assuming we don't get another midfield decimation, he wouldn't play every game with us. Scholes, Carrick, Anderson, Cleverley, Kagawa and even Giggs are all central players and will all get games. The only players never dropped/rested are Vidic, Evra and Rooney. Obviously they get rested for the cup games, but in terms of the PL, whereas Nani, Rio, Carrick, hell even the keeper can get rested, they're the only three that don't, nothing would suggest Modric wouldn't be another one. So chances are he'd probably play a similar amount of games for both clubs, except there'd be no chance of him being rested for big games, where he possibly could at Madrid.
2) Non issue. Papers link us with anyone. He was actually coming three weeks ago, remember this?
http://www.thesun.co.uk/sol/homepage/sport/football/article4360715.ece
Gill will always say there's money available. Appeases fans, keeps us off the Glazers' backs. God forbid he said "Sorry guys, Glazers have the money, no more transfers for us."
3) I'm not doubtful we're looking for midfielder, just doubtful we'll get one. There aren't too many available, and to get anyone worthwhile will cost +£25m and ~£100,000k wages.