The size of the outside fillet is set by the applicable Code (e.g. 1.4 times the nominal pipe thickness or the width of the hub available for welding, whichever is less).
The set back distance is to avoid damaging the flange face with the inside weld, and for pipelines, pigging considerations. Some codes specify a dimension, others such as ASME B31.3 do not. The set back dimension is not signficant with respect to strength or fatigue considerations.
The inner weld is always preferred, but not always required. You need to check the applicable code for requirements. When required, it is generally a small fillet weld (e.g. 1/4 inch or the thickness of the pipe, whichever is less).