yes, the seed is encoded using groups of 3 words, extra words are ignored.
(note that version 2.0 will use a hash of the seed phrase)
How come it does not warn the user when entering a short seed? This significantly increases the chance of a collision.
you are right, it should warn the user.
however, the software only generates seeds with 12 words.
there can be a collision only if users invent a seed, and "restore" from it