Is it normal ChatGPT told me it was "literally smiling" for me?

It is pretty normal, mainly because it doesn't constantly take into account that it's an AI when generating text and it's basically predicting the next most likely token, so if it said something like "After reading that, I was literally smiling", when it finishes "After reading that, I was literally" it has a few options of what to continue it with.

If the previous chat was something that would cause a regular human to smile or laugh (a behaviour existed somewhere on its training data), then "smiling" and "laughing" are probably the most likely next tokens to express humor. Similar could be said about topics other than humor.

Yes-ish. I normally run gpt with some form of adjustment prompt to ensure it is not too agreeable, but even with those, when I tried 5.6 I found a noticeable jump in -- not sure to label them -- those types of phrases. They disappeared after some fiddling with the initial prompt.

Remember that Chatgpt and other LLM's don't think. They just return the most likely next word based on a statistical model.

Depends on whether you like have parasocial relationships with machines or not. It will say what is necessary to get you to keep using it on a regular basis.

LLMs are trained on human language so, it naturally misuses the word 'literally' in the same way that almost every human does.