(i) Power dissipated in a circuit is given by P = Vrms Irms cosφ where cosφ = R/Z. For an ideal capacitor, R = 0. Hence cosφ = 0 ⇒ P = 0.
(ii) When AC source is connected, the reactance of capacitor is XC = 1/ωC. On reducing C, the reactance increases, and lesser current flows through the bulb and brightness reduces.