2. If the BULK of the FET is connected to more positive voltage than the source, the source-bulk diode won't be reverse biased, and the FET won't operate normally.
If the BULK voltage is more negative, the threshold voltage of the device will increase by "body-effect".
If you connect source and bulk together above issues won't occour, it will always operate and the threshold-voltage can't change with source voltage.
What FvM said is also true, however I think not the vertical structure is the point why they connect source and bulk, in above structure the bias of the p+ body region could be also solvable.