How did the baking soda recipe for crack cocaine catch on?

I found a source which confirms your suspicions expressed in part 2. Cocaine is the main form being imported, then it is converted to crack by the local gangs (emphasis mine):

Production

Coca is not cultivated nor is cocaine produced in the Central District. Colombian criminal organizations produce cocaine in Colombia and ship it to the United States through Central America and Mexico. One of nine drug routes specified in a USCS FY1999 Threat Assessment, this route is labeled the "Cocaine Corridor" and is one of the most lucrative drug pipelines in the world.

Gangs in Los Angeles convert powdered cocaine into crack and either distribute the crack locally or transport it to other cities in California and nationally. Hispanic and African American gangs are heavily involved in the distribution of crack cocaine in the Los Angeles area.

Another website blames a price drop due to a glut on the market in Miami for the creation of this form:

As the land border became more tightly controlled, cocaine would be shipped via the Caribbean and the Bahamas and end up in Miami. The Contra rebels were in full flow in Nicaragua, and reportedly the CIA turned a blind eye to the rebels exporting significant amounts of cocaine for funding. Unfortunately for dealers, this produced a glut, which resulted in lower prices and therefore lower profits. Dealers resorted to adding sodium bicarbonate or ammonia to the powder to make it more volatile.

This was when crack was born.

So this should address part of the first section of the query.This same article continues with some dates:

Crack first appeared in small batches in major cities in 1981. The police didn’t recognize this new rock-like material, but chemical analysis showed it was basically cocaine as freebase (rather than as the hydrochloride salt). As the technique spread, though, it gained more adherents. The first large-scale use, and presumably mass production, was observed in 1984 in Los Angeles

Smoking cocaine never became mainstream. It remained a part of drug sub-culture. It was propagated among cocaine users who were looking to get higher, and could afford to smoke obscene amounts of cocaine. It began in 1974. It was isolated to Southern California, in L.A. and especially Hollywood. The first related hospital case was in 1975. The greatest dope dealer in L.A. at the time was Tootsie Reese. He says that he learned about base in 1976 when he visited his "white friend" chemists at UCLA Berkley. A year later, he knew about using baking soda.

Since 1975, "conversion kits" had begun being sold in magazines like High Times. The thing to realize, though, is that cocaine was still a boutique drug. Basers consumed large amounts of it. It was mostly practiced by entertainment professionals and business execs. Richard Pryor's accident brought basing to public attention.

A street manual from 1979 does not include baking soda. A Rolling Stone article from 1980 says that kits contained Ammonia or baking soda, and were added to ether. It can be presumed that the ingredients of the kits were not disclosed to the buyer. The article says that free base was not sold but made from street coke. For some time, though it could have been a trade secret among the dealers or kit makers. Free base cocaine is not as stable as Cocaine Hcl, but crack doesn't exactly sit around.

When cocaine hit the masses in the 80's, it probably became common practice among free basers. These were people who could afford to buy cocaine and make it themselves for the sake of purity. Crack dealers would probably have continued to use the old Ammonia and Ether formula for efficiency. Regardless, the scourge of the rich became the plight of the poor.

I just wrote this whole answer, and now I realized that baking soda has nothing to do with safety. It was switching from ether to water. While it seems simple, it does not appear to mentioned at all in the period mentioned (up to 1980). Nor was it easy for the average American to find cocaine.