The fact that the owner of the property died while leaving behind a Will is an important key factor to consider. In such a case, as usual, the Will will be executed by the relevant procedure given in law. The nominee being deceased does not have any impact on the matter of execution of the Will. But when such property is being devolved to such a nominated person, the court will consider whether such nominee died intestate or testate.
Therefore, to answer your questions;
1. Property will be devolved to the nominee. Since the nominee is also deceased, the court will look into the availability of a Last Will executed by the nominee. and if such is there, the nominees of such Will will be the heirs to the property.
In the event where a Last Will is not available, the property will be devolved into the heirs of the nominee.
2. Depends on the relationship between the "Owner" and "Nominee". If you can describe their relationship, it can give you a much clearer answer.
3. Applicable Law is the Indian Succession Act.
Applicable provisions and case laws would have been demonstrated if the relationship of the above-mentioned parties were given in detail.