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Interesting I hadn’t seen much (anything) about this in my fairly limited research online.
The soil that the type 1 is going on is already very compacted as I have dug down quite a lot from the original level of the garden.
In this photo the plan was for the 2/3s closest to the back wall to just have weed membrane then ~30mm gravel and flower beds whereas the 1/3 (closest to the bottom of the photo) will have compacted type 1 to bring up the level before being covered in membrane and gravel
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Yep wrap it on all 6 sides to prevent soil/fines being washed into the voids between the large pieces of aggregate.
Aggregate laid on soil will just sink in.