Thanks for the questions! I’m not sure of the contract for students, but I believe that sophomores are also guaranteed housing, as they have to live on-campus (as of the incoming Class of 2013).
(1) There is a considerable amount of off-campus housing in the area. Many (maybe ~50% of the class) students opt to move off campus beginning their junior year. This housing is available through local landlords and is rented by students (graduate and undergraduate) as well as local members of the community who work in the area. Check out ResLife’s Off Campus page for more resources. Pay close attention to the link for “Jump Off Campus”
(2) If you wish, it is VERY possible to live on campus all four years. You may not get the housing that you prefer (which depends on how the lotteries unfold), but you can very easily live on campus all four years. Often times, you’ll get something in your top choices. Also, you can participate in CR2 after junior year, which means you sign to live in the same room for your senior year.