If in doubt, don't do it. It's better to wait than be disappointed for 16 years. I have to say that second picture has me a little puzzled, the paws on the dog look huge, and I hear that's a good indicator of future size. It may be just the picture though. Nearly every breeder I've read about says that their dogs will be less than 7 pounds. Champion grandparents mean nothing. Sometimes backyard breeders buy offspring from champs and think this means that they should breed them. Sometimes the dogs are closely related and the recessive gene that didn't show up in parents shows up in puppies. You've asked a lot of good questions, I would also want to know about coat if it's cottony or true silk coat. The ears not standing is another concern although it can be extremely cute, it's not standard. Does this breeder belong to Yorkshire Club of America? I would look for that, and also I've read that CO has a lot of puppymills, so beware. Here's a link to Yorkshire Terrier Club of America.
http://www.ytca.org/breeder3.html#CO. Just talking to a good breeder can really answer so many questions.
Nancy
I just want to add that 3 pounds at 10 weeks indicates she will be well over 7 pounds.