Does there exist a detailed explanation of the logic behind Notes visibility by hierarchy and default notifications?
This is what we observe:
Notes appear to be generally revealed upwards in the Hierarchy.
If "Notes" panel is viewed on a project all notes will be visible from every subordinate object. When viewed on a task, only notes input on that task are visible. Correspondingly, notifications appear to default to those users assigned to an object. This seems pretty straightforward.
Notes that are entered on a version appear to propagate up through that task;