Have you tried it out? It worked on my system.

The parent is correct, the given command redirects stdout to stderr, it's not copied (so stdout will be empty).

Again, have you tried it?

    # echo "foo" 1>&2 | sed 's/foo/bar/'
    foo
    bar

Edit: I've done some more testing, and discovered that the above works on zsh, but not in bash

2nd Edit: Ahha! http://www.cs.elte.hu/zsh-manual/zsh_7.html . So this is because zsh w/ the stock config (MULTIOS option enabled) will open as many outputs as you give it. So it can both copy FD 1's contents to FD 2 and to the pipe'd command.