Usually when you add the "y" (ee) sound to a word, it makes it sound more cutesy and less offensive. "ie" is another spelling with the same sound. You do this with nicknames. For example, your name could be George. Your mom might call you "Georgie". Or if it's John, she might call you "Johnny". That sound makes it sweeter and softer. Same with "dummy". It doesn't have a direct correlation with a word that doesn't have the "y" (ee) sound. (Although, sometimes you'll see teenagers and young adults on the Internet calling animals or people affectionately "dumb" in a different way than seems correct i.e. "You're a dumb". That's just slang.) If you were to outright say, "You're dumb!" that would cause some offense in all age groups. Same for if you said, "You're an idiot!" or "You're stupid". All three of those are a bit different, but are on the same continuum of meaning.

The MOST important thing is if you have a good relationship/friendship with the person. In the UK we would say something awful in jest to a friend, something we wouldn't say to someone we hate. A casual acquaintance 'dummy' is fine, my brother I would actually take it much further because he knows I am being playful. Someone I didn't know at all, I wouldn't use either.

Eh not so much. It's just an immature silly way to tell someone they said something silly or less than smart. Children might be offended but usually not adults

It is not a word that is used to actually hurt people and is often used jokingly:)

Did you ever see -- there's a famous series of books explaining things like Informatics or DIY and are titled "*** for Dummies". Well in any case, I think this may sound too confidential if said to the wrong person in the wrong moment!