**1. He Hits**

Rules Compendium (p. 64) has it covered, emphasis mine:

> Even when hit by spells (including touch spells) or magic weapons, an
> incorporeal creature has a 50% chance to ignore any damage from a
> corporeal source—except for positive energy, negative energy, force
> effects such as magic missile, or attacks made with ghost touch
> weapons. Although it isn’t strictly a magical attack, holy water can
> damage incorporeal undead, but a hit with holy water has a 50% chance
> of not affecting such a creature. 
> For attacks that require attack
> rolls, the chance to ignore damage is treated as a 50% miss chance. If
> a creature receives miss chances from multiple sources, such as from
> being incorporeal and having concealment, they don’t stack. Only the
> highest miss chance applies. 
> **Nondamaging effects affect incorporeal
> creatures normally unless such effects require corporeal targets to
> function** (such as implosion) or they create a corporeal effect that
> incorporeal creatures are normally unaffected by (such as web or wall
> of stone).

Spark of Life doesn't have anything to suggest it requires corporeality to work, so it should work just fine on your Shadow.

It's worth noting this was actually changed originally in Monster Manual III's glossary for the Incorporeal Subtype (p. 214). The Rules Compendium has a sidebar (p. 65) that explains why:

> With all the moving parts of D&D, it’s no surprise that occasionally
> some tidbit is solved in seemingly random fashion. While working on
> Complete Arcane, I discovered the ghostform spell, which allowed the
> caster to assume an incorporeal form. Picked up from Tome and Blood,
> the spell had previously been ridiculously overpowered, and
> development had already reduced the duration and increased the spell’s
> level to 8th. But when reading through the spell, I realized I had a
> ton of questions. The spell addressed damaging spell effects, but what
> about nondamaging effects? Could a caster under the effect of
> ghostform be dominated or slowed? Or gain the benefit of allied
> spells? On perusing the Monster Manual, I realized that this wasn’t an
> omission in the spell, but rather in the incorporeal subtype itself.
> Luckily, we were working Monster Manual III simultaneously, in which
> we’d already planned to release an updated glossary. The changes to
> the incorporeal subtype were made and entered, and now ghosts
> everywhere can rejoice that they now know whether or not they can be
> affected by the control undead spell.

I've been playing this using your #2 for quite a while, applying the miss chance when trying to apply the spell. From the SRD description I'm not sure how else to treat it, due to the lack of guidance on what to do. It turns out that omission wasn't deliberate and was clarified later.

That of course leads into the ever popular "can Wizards make a rule that even they can't change" dilema with the core books vs other books changing how things work. Given that it's filling in a gap rather than actually changing text (the parts that are spelled out in the SRD appear to be the same in the MM3/RC version), we're probably okay there.

**Touch Spells Are Inconsistent**

The weird part is that the 50% miss chance applies to touch spells, but according to the text, only ones that do damage. I'm not sure if that was intentional or not, but they keep saying "50% chance to ignore damage". They even say that in the new version, right before explaining that it's treated as a miss chance. By my reading, that means that a touch spell that isn't doing damage would hit just fine.

That inconsistency bugs me, and I'll probably keep playing it as I have been in my games (touch spells still get the 50% miss chance), because I love consistency. YMMV, of course.