1. "I'm on the top of the world" is an idiom; it's common, and means successful or feeling really good; e.g., She felt on top of the world after being promoted; he was on top of the world on his wedding day.
"looking down on creation" isn't an idiom, nor is it common. It's just part of the song.
2. In that context, yes.
3. It isn't common usage and I don't know what it means.
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