It was a "yes" / "no" question after all.
1. Does an Improvement Patent supersede and render useless the original patent? - No. If an inventor obtains a patent on improvements to an existing invention which is still under patent, they can only legally use the improved invention if the patent holder of the original invention gives permission, which they may refuse. "A patent is not the grant of a right to make or use or sell. It does not, directly or indirectly, imply any such right. It grants only the right to exclude others. The supposition that a right to make is created by the patent grant is obviously inconsistent with the established distinctions between generic and specific patents, and with the well-known fact that a very considerable portion of the patents granted are in a field covered by a former relatively generic or basic patent, are tributary to such earlier patent, and cannot be practiced unless by license thereunder." – Herman v. Youngstown Car Mfg. Co., 191 F. 579, 584–85, 112 CCA 185 (6th Cir. 1911)
2. Could they sell the tool on the Improvement Patent if they lost the original patent or would an improvement patent be tied to the original? - No. See above.
3. Could they legally just stop paying and invite me to take the original patent back? - Not legally, in that you could sue if they didn't pay according to the contract.
Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for the time and effort that I spent on this answer unless and until you rate it positively (3 or more stars). Thank you, ***** ***** luck to you!