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Question 1. If I were to accept the insufficient bid, could I now bid 1♠ myself ? I assume yes, but just to be sure.
As it was, I refused the insufficient bid, RHO nodded and substituted it with Double. I decided that this probably did us less damage than substitution with 2♥ and so accepted it.
Question 2. In case of substitution of 1♥ with 2♥, I would be obliged to accept the bid, but we would still retain our right to an adjusted score if the Director decides we were damaged? That's how I understand Law 27, just to be sure.
Question 3. Was a substition of 1♥ with Double admissable? Law 27 B3 says that "except as provided in B1(b) above, if the offender attempts to substitute a double or a redouble for his insufficient bid the attempted call is cancelled.", and B1(b) says that "if the insufficient bid is corrected with a comparable call (see Law 23A) the auction proceeds without further rectification". So I guess it all comes down to 23 A1, "has the same or similar meaning as that attributable to the withdrawn call". In their agreement, Double here promises 4+card ♥ and playability in ♣. That is certainly similar to 1♥, but is also a superset of the possible meanings, which seems contrary to the spirit of 23 A2.
Question 4. If the answer to 3 is no, would the Double be admissable had I initially passed instead of opening 1♦ ?