My question: Can 2 be set as the default state so that users don't need to click the "expand" link?

Yes, but only if you modify the template files and remove that behavior

Or, even better, can the buttons at the bottom of the window be separated and placed at the top of the page so they are always available? Thanks.

Yes, but only if you modify the template files and move the buttons.

Both require significant changes to the template files to have what you're wanting. You can find the default template files at the below location.

/components/com_comprofiler/plugin/user/plug_cbactivity/templates

Make a copy of the default folder then delete any template file you do not intended to change. Next select your template within CB Activity > Parameters > General. Then make whatever changes you like. Please note the jQuery has specific bindings and moving elements to drastically will prevent the jQuery from being able to bind to its elements.