Q1. Probably right to write 'UK' ... that is what most immigration forms around the world expect as an answer to this kind of question (they would not understand 'UKPA'). But in this case, 'UKPA' at an embassy in London will be fine I'm sure.
Q2. UK passports used to indicate where they were issued, if I recall, London, Peterborough, Glasgow or Belfast. They no longer do. So looks like the visa form is out of date. Either write London, or UK (i.e. so it is clear that is was not issued at a UK embassy overseas)