Thanks for your questions. If you look at the protocol behind the STEEM blockchain, 1 SBD is meant to be pegged to 1 USD. To enforce this peg, 20 witnesses report hourly to the blockchain the rate of STEEM/USD. The hourly average of this rate over the future 7 days is used to convert SBD to STEEM for every such request. Therefore the rate reported by the witnesses is not STEEM/SBD, but STEEM/USD.
For the second question, USD was just used as the unit to show how much USD in STEEM you would gain using this strategy. In actuality, you convert 1000 SBD each day, and after 7 days, you sell the amount of STEEM so that you get back 1000 SBD and possibly have some STEEMs left. That remaining STEEMs is your profit.