You can still be hit by AoE if you are standing next to the intended target.
Shadow Form's damage reduction is always calculated before Protective Spirit, regardless of the order they are cast.
Anomaly! Refreshing any Assassin enchantment before it ends will add an additional 5 damage reduction. Enchantments that refresh automatically, such as Critical Defenses, will also give additional damage reduction. Any additional damage reduction is lost if Shadow Form itself is refreshed.