Does Autowatch remove the watchers when the issue no longer matches the rule?

Autowatch does not remove watchers if the issue parameters do not match the original JQL. All autowatch does is listen for issue related events in JIRA and if the issue tied to the event matches the JQL you've entered, the desired watchers are added to the issue.

Do Autowatch rules work with Subtasks? Do parent Task watchers cascade down to Subtasks?

Autowatch only adds watchers to issues which match the description. Jira treats subtasks as issues, so if they match the JQL the watcher will be added. But Autowatch does not cascade the watcher of a parent task down to all the sub tasks.

Does Autowatch add watchers to all the issues in Jira before it was installed?

Autowatch does not apply the rule to existing issues. It only applies rules to newly edited and created issues. So if the attachment rule doesn't work after a user adds an issue, it's cause for concern. But if that's not the case it's working properly.

How do I watch ALL issues?

Use the JQL created > 0