1. Can you replicate this on the demo site? If not, can you share a link to your site so we can take a look. If you can share admin login, that would be great as well. You have my email address.
2. I typically add a new page to the site with the url as http://domain.url/secure/login.aspx. You can then move the page around the menu however you want using the Page Manager. You can also add the Sign In Module to a page and include that page in the menu.