It's only recently implemented. It's well-integrated with backend, but some UI aspects could be improved with time, so don't throw it into trash just yet!

1- as for dropdown, maybe the threads could have a star that can turn into green for watching
2-
>Threads that I've not read and that have gotten replies sometimes have nothin, and threads that I am currently scrolled to the bottom of still have a number.
>So the whole fuckin idea of notifying me how many replies a thread's got is stupid
It only needs the first point fixed somehow, I think tab notifications are/would be otherwise fine
3- yeah... it should ^^;
4- I didn't notice if it keeps asking after declining once, as I just allowed it. It's fine to stop asking after user refuses to have notifications once.
5- Probably simple CSS could fix this, but it's hard to reach a design that would please everyone