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1. I am just curious. Is reusing UID is linux allowed or should it be avoided and why?
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As linosaurusroot already mentioned that you can re-use uid provided that the conditions mentioned by linosaurusroot are met. In a production environment I wouldn't go with re-using uid's as many organization does not follow that. The logical reason behind it is that a new user should be a new user to the system and anyways you won't run out of UIDs so why worrying about it. Better go with new UID.
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2. Can one create a user in Linux without a password and if so, what will the account be rendered as, disabled or inactive ?
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To answer your second question, when you create a user and you don't assign any password to it, it will be neither rendered as disabled or nor inactive. The user will be active it is just that there is no password assigned to it. You can still login with that user if you have got password less login configured (basically ssh key based authentication).