Every wallet stores customer seeds and private keys internally; it cannot function differently.
This is incorrect, electrum does not store your private keys, it is stored on your wallet file locally (on your device) and encrypted with your password.
Yes. Internally, locally... What is the difference? The point is that the seed phrase and private keys are created, stored and accessible by your wallet software. And just to clarify, it is not necessary for the file to be encrypted (although it is generally not recommended to store the keys in an unencrypted file).