>>>1 - Please advise how to fix ?
You can simply call api - FND_PREFERENCE package to change email-notification preferences. As in you case, we can call api as follows for user1
Ref - How To Change The E-mail Notification Preference En Masse For Multiple Users (Doc ID 417030.1)
>>>2 - Please advise what is "module_name=PWDVALREUSE"
If you observe PWDVALREUSE in this column, then it is an implication of setting profile - Signon Password No Reuse
If this profile is set, it will not allow a user to reuse older passwords and older passwords are stored(encrypted format) in table fnd_user_preferences.
Ref - How To Keep Track of FND User Password Changes (Doc ID 844520.1)