1) She was definitely used. Whether she didn't or did anything with Pac is irrelevant. Once she took that photo and recorded her vocals, Pac succeeded. All he had to do was say those infamous lines on "Hit Em Up" and everybody thinks and assumes what he said was true. It doesn't matter if it happened or not, people will use the fact that she's hugged up in a photo with him and that she did a song with him as evidence.
2) Whether she knew Pac was Death Row or not is also irrelevant. The bigger issue is that she was in the middle of the Pac/Biggie beef. That's the one that directly affected her being that she was Biggie's wife. The Death Row vs. Bad Boy beef was smaller in comparison in regard to Faith. Pac's claiming that her husband had something to do with his shooting, so whether he was Death Row or not was a non-factor.