I have four questions.
1. Why does he need the H4 receipt in order to submit my 485? Is it to prove that I am in status when the 485 is reviewed?
-You had better file I539 to change your status to H4 before your H-1 expires. Although you can file I-485 without a legal status using 245(k) benefit, you had better have a legal status, just in case, and the legal status will give you more flexible. Nothing loses to file I-539 (only pay the filing fee of $290).
2. If so, should I change to H4 in the U.S. or should I try to get a visa stamp overseas?
-Either.
The attorney mentioned that it will be quicker to take the trip back to China.
-That is true, but if you don't want to go to China, just file I-539 in US and provide the receipt for I-485 filing. USCIS will approve your H-4, anyway, as long as you file I-539 before your H-1 ends.
3. USCIS states that they will excuse a late filing caused by the government shutdown.
-The US Government has reopen for a few months, so your question does not exist.
Does it mean that I can submit my 140 and eventually H1 extension as long as I am less than 16 days late from the date I expire?
4. If the answer to 3 is yes, should I wait to see what happens with my H1B given that I will effectively end my H1 if I change to H4?