Are mpls tunnels the only option for reachable L3vpn next-hop?

If I have the following L3vpn topology:

CE --- PE1 ---- PE2 --- CE

*PE1 and PE2 are directly connected.

*PE1 and PE2 exchange VPNv4 routes.

*If PE1 and PE2 were to exchange transport labels for their loopback address and PHP was enabled, then traffic within backbone would have only a VPN label.

1) So my question is, in such a scenario, is an mpls tunnel between PE1 and PE2 really needed for VRF customer traffic to pass via the provider backbone?

2) A non-default VRF route can point to a NH in deafault VRF table only if it has a transport label associated with it (even if it means no label)?

3) Can other types of tunneling be used instead of mpls? (GRE for example?)

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