Are the images still overexposed when you shoot in the Auto mode after resetting the camera to default settings? If so, there may be an issue with the camera. I would suggest contacting our phone support for more assistance on what options you would have in that case and maybe some hands-on troubleshooting. Please contact our Technical Support Team at 1-800-652-2666, Monday through Friday between 9:00 am to 9:00 pm ET.
No; lowering ISO values is akin to closing down (narrowing) the aperture or using faster shutter speeds.
It's not clear what mode the OP was using. But it sounds like it wasn't fully auto since they were able to manually adjust ISO.
I'm sure I follow what you're describing though in terms of lowering ISO will lead to more (higher) exposure. It wouldn't. Exposure would either stay the same or would be lower. Here, I'm assuming the camera will be allowed to adjust shutter and/or aperture automatically.
For simplicity sake, let's assume the lens only has two apertures (f/4 and f/5.6) and the camera has two shutter values of 1/100 and 1/200, and three ISO values of 100, 200 and 400.
If a shot is taken at f/5.6, 1/200 and ISO 400 that leads to a good exposure, you can lower the ISO by two stops and the camera will adjust the aperture and shutter by one stop each. So the equivalent exposure would now be f/5.6, 1/100 and ISO 100. No increase in exposure at all.
Then, say that at f/5.6, 1/200 and ISO 400, the image is overexposed. By lowering the ISO to 200 (here, the camera wouldn't stop down the aperture or increase the shutter since already at their limits) the exposure would decrease by 1 stop (-1EV). Then -2EV if lowered to ISO 100.
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