1. Probably INZ won't treat you as a Bonafide visitor because you were granted a WHV and they are not satisfied about your "genuine intent" to visit. Please see
https://www.immigration.govt.nz/new-...tity/bona-fide
I think withdrawing your application would prejudice your "genuine intent" for which you have applied under. Just be honest with them and nothing will hurt and so that you will not be in trouble with your future visa applications.
2. No. you will not be considered staying illegally right away if your application is declined so long as you notify INZ of a reasonable time you decide to voluntarily exit NZ as soon as possible.
When you submit to INZ supporting documents as a response to PPI (Potentially Prejudicial Information) and they are not satisfied their decline decision letter will be enclosed with your passport and other documents sent to you by post. Please see Interim Visa
https://www.immigration.govt.nz/new-...a/interim-visa
3. I don't think so. So long as you did not provide false and misleading information to INZ.
NOTE: This is not a legal immigration advice.
Hear from the LIAs in the forum ChrisWmn and Karen Philillips.