1. Absolutely no damage with a manual transmission. Mine's fine after 181,000 miles and LOTS of neutral coasting. (nearly 4 years hypermiling)
2. Fuel cut off only happens in gear when you're engine braking.
3. If you let off the gas in gear, you're not coasting / gliding. You are engine braking. It's useful at times, when you must slow down. It's not very useful in a P&G routine. Rolling in neutral will make the most of your momentum, while only consuming a very small amount of fuel.
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11-mile commute: 100 mpg - - - Tank: 90.2 mpg / 1191 miles
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