If you are interested in visual models of participatory research, you might consult a recent publication: Richard Chalfen... Differentiating Practices of Participatory Visual Media Production. SAGE Handbook of Visual Research Methods (2011) edited by Eric Margolis and Luc Pauwels, pp. 186-200.
Also of relevance is a recent issue of the journal Visual Studies, namely Lifting Up Voices of Participatory Visual Research (with Wendy Luttrell). Special Issue of Visual Studies (W. Luttrell and R. Chalfen (eds)). 25(3): 197-200.
Yes they are, after all participation is the key to authenticity and the right of people to decide and be a part of it, and research will be biased and one sided if participation is not there of the target groups
If designed and implemented well participatory methods can be used for both purposes, and more. These can be a tool for generating data, can help in empowering local communities and can support change processes. A word of warning however is needed as there is no one-for-all-cases receipt since context matters a lot and it is very difficult to defend a stand which claims that participatory methods can always lead to such outcomes. There is a vast scientific and praxis literature on this topic you should consult for further details on the potential and use of participatory methods.
Well, depending on what you are working on, I guess. Personnally, I try to make people involved but there is some rules. I used it in my research on economic development