I don't know about "default"; case sensitivity is specified by the collation, and you can set a default for the server when you set it up.

I'm pretty sure it doesn't make any difference to performance. I generally set it to CI_AS (case insensitive, accent sensitive) unless there's a very specific reason for case sensitivity.

Obviously case-insensitive searching with a case-sensitive collation (or vice-versa) is going to have performance implications.