The photographer, (sorry if I spelt his name incorrectly) he is able to draw two location encounter cards in arkham and pick whichever he would deem beneficial. Now if he lands on a space where you can substitue an encounter for a specific encounter, (Bank, Police Station, Any store) would he be allowed to draw one card from the enounter deck and if it was a bad one instead use the encounter at that specific location?

Nope. Darrell special ability says "When drawing location encounters in Arkham"; location special abilities are used "instead of drawing an encounter". Hence, if you go for the special ability, you don't draw cards, hence Darrell's ability can't be used; if you draw a card, you can't use the special ability of the location, but you are allowed to use Darrell's.

Yeah. I believe the rule is that technically those special location abilities are not encounters themselves, but rather things done instead of an encounter, so if a rule affects encounters specifically, it does not affect special location abilities unless otherwise specified.

There is an investigator who can do just that: Ursula from the Innsmouth expansion.

http://www.arkhamhorrorwiki.com/Ursula_Downs

"Unique Ability: Quick-witted - Arkham Encounter: Ursula may have an encounter at a location even after using a location ability that would normally be taken instead."

Yeah. Ursala is especially good for locations that have some good encounters but many bad ones, like the Asylum and the Hospital.