What situations would be good to use context?

For certain types of props (e.g. locale preference, UI theme) that are required by many components within an application.

If you need to pass a prop down 1 or 2 levels, is context necessary?

It's not completely necessary and composition might be abtter solution. Context is designed to be used by many components.

Can you pass a component instance as a prop to avoid the need for context?

Yes you can.

Can you write your own components that accept render props?

Yes.