Avg watts vs max watts

This is quite possible. With little resistance from the trainer you need more speed to produce high power to go up hill. see this topic How Does Zwift Determine My Speed?

This does not sound possible, is the wheel is not spinning then there will be not power and thus the avatar will stop on any incline.

If your trainer is sending power data with the wheel stopped then there is something wrong with the unit and you need to send it back.