Why does New Collaborate use a Communication SharePoint site?
A SharePoint Communication Site offers a range of benefits to practices and customers, including the ability to customise the appearance of your site with a range of different templates.
For more details on the benefits of a Communication Site refer to the Microsoft 365 support article: Use the SharePoint Topic, Showcase, and Blank communication site templates
Why do we need to select the permission "New and Existing Guests?"
This setting allows your practice admin account to send invites to the SharePoint site to your clients.
Why do we use the permission "Everyone except External Users"?
This "Everyone except external users" group is a unique Microsoft Group used to allow internal users to access nominated settings without allowing external users.
If you want to restrict internal user access to sharing documents via Collaborate, you can use a different group by updating the settings in FYI via Automation > Apps > Collaborate.
Why does the Document Library use separate permissions from the SharePoint site?
Using separate permissions prevents external clients from being able to access other client folders.
While all external users are able to access the portal homepage, individual access/restrictions are needed for documents. If the Document Library were to inherit permissions from the top-level site, all external users would be able to see all client folders, instead of only those that have been shared with them.