One of the results of the Kelly Criterion which dooglus used is that for a bet with 1% house edge for even money bets only the optimal amount for the investors to bet is 1% of the house bank.
It should be noted that the Kelly Criterion changes for different payouts. For instance if the player selects a profit of 50%, Kelly Criterion says he should be allowed to bet up to 2% of the bankroll. Presumably dooglus thought that would complicate the rules and he assumed that the majority bets would be 1:1 return.
I'm pretty sure it applies for all odds. You need to look at the payout that the house is getting. When a player risks 1 unit at 33% for a 3x payout for example, the house is risking 2 units for a 1.5x payout with a 67% chance of winning. If you apply the Kelly Criterion on those numbers you'll see that it's still optimal to risk 1% of the bank. And the same applies no matter what odds the player is getting.
Technically it recommends you do that only if betting a profit of 100% (i.e. 50%-HE/2 probability of winning). It changes if you select another profit.
I don't think it does. It changes for the player, but not for the house. Of course the player has a negative expectation and so shouldn't be playing anyway.