Both go together to convey respect for the चाचा
Why is it rahe rather than rahi?
चाचा is masculine so 'rahi hai' won't be used... And moreover, 'Rahe hai' is used because here we are talking about an elder person that is uncle. Yuh that's it
Because chacha is masculine. So chacha/mama/fufa/papa kha rahe hain. Chachi/mami/bua/mummy kha rahi hain as they are feminine.
It only says "paternal" for the uncle here, whereas चाची was specified to be the father's brother's wife (rather than father's sister) – does that mean it doesn't differentiate there?