Question about how Hash Rate effects Bitcoin

[victoryscope]

Hi,
I have witnessed the recent hashrate drop issue and trying to understand how this affects transaction capacity on the bitcoin network. 

Is it true that when there is sudden drop in hash rate the number blocks mined per day goes down?  (does this then mean that the network has slowed down? As in, it takes longer for a transaction to be confirmed?) In which case, that is why people are willing to enter a bidding war and pay higher fees it seems... I think?

If this is all true, and the sudden drop causes a network slowdown, I am wondering, what happens if the network hash rate stabilises at this new lower rate for a while (such as weeks?). 

Does the network re-adjust to its pre-sudden-drop levels of transaction capacity? (if that has indeed gone down?). If this is how it works, how long will it take do you think for the transaction capacity to return to normal if no increase in hash rate occurs? (as in if these miners stay offline for a while, such as weeks).

Thanks

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[NeuroticFish]

Is it true that when there is sudden drop in hash rate the number blocks mined per day goes down?  (does this then mean that the network has slowed down? As in, it takes longer for a transaction to be confirmed?) In which case, that is why people are willing to enter a bidding war and pay higher fees it seems... I think?

Yes, if hash rate drops, the number of mined blocks / day decreases.
The "bidding war" for fees is however there, with or without the drop in hash rate. Those who want their transaction confirmed fast will have to pay more than the rest.

Does the network re-adjust to its pre-sudden-drop levels of transaction capacity? (if that has indeed gone down?). If this is how it works, how long will it take do you think for the transaction capacity to return to normal if no increase in hash rate occurs? (as in if these miners stay offline for a while, such as weeks).

Every 2016 blocks the difficulty is re-adjusted. That is usually at 2 weeks, but of course, when the blocks slow down, this time will be also longer.
At the adjustment we should get back to one block at every ~10 minutes.

If this is all true, and the sudden drop causes a network slowdown, I am wondering, what happens if the network hash rate stabilises at this new lower rate for a while (such as weeks?). 

Keep in mind that after getting back to normal the number of incoming transactions during week will still be high. So the mempool (the waiting transactions) will clear up only in the week-ends.
Also keep in mind that many may withhold their transactions until "better times" and they may send them after the next difficulty adjustment.
So the mempool will clear up:
* in time, slowly, mostly in week-ends and when there's a somewhat cool down, but also when the price doesn't fluctuates too much
* at some point the Chinese miners will come back online and then the hash rate will rise by a great deal, getting to much faster blocks and should clear up the current mess

[kano]

...
Does the network re-adjust to its pre-sudden-drop levels of transaction capacity? (if that has indeed gone down?). If this is how it works, how long will it take do you think for the transaction capacity to return to normal if no increase in hash rate occurs? (as in if these miners stay offline for a while, such as weeks).

Thanks

As mentioned above but to clarify it:

With the next diff change, the difficulty will adjust to the drop in hash rate, and the drop will no longer have any effect.

Since the drop started close to the last diff change, one diff change will fix it.

However, if the drop is say 20%, then it will take 25% longer to get to the next diff change.
i.e. If for 2 weeks we have 80% of the hash rate, and get 80% of 2016 blocks, then to get the missing 20%, will take another 20% at that 80% rate, i.e. 25% longer - or about an extra 3.5 days over the usual 14 days to make it around 17.5 days for this diff change.