A) There's a 50% chance of successfully creating a Rank 2 Jewel. If it fails then you lose every jewel and the blue print. If it's successful then you also lose all Rank 1 jewels and the blue print but you get the corresponding Rank 2 jewel. You can raise the success rate to 100% if you use a Jewel Fusion Safeguard.
B) They drop sometimes from field bosses (including some dungeon bosses like Vulcan from IV), But it's not a frequent drop.