That seems managable when you have 3 candidates. What happens when there are 10 or 20 candidates? Would voters have to list their top 10 or 20 choices?
If all your choices are eliminated, then for future rounds it counts as abstaining. If enough people do so that no one crosses the threshold, the process repeats until the last candidate remaining is (normally) deemed elected without reaching the quota (though it could also be treated as cause for a rerun if preferred).
In practice here, even in such large contests the top 5 candidates normally end up with 90% of the vote and there's enough overlap between the parties (the further left parties transferring to centre left, the two centre right parties transferring to each other) that there's normally a clear leader by then, it's rare that e.g. a candidate with 48% gets eliminated in favour of a candidate with 49% in the last round.
No, you would only have to specify/rank as many choices as you want your vote to carry over. If you only like 5 candidates and hate the other 15, your vote will simply be thrown away and not counted if you don't specify any of the other candidates.
