The compound is highly stabilised by higher Conjugation and is thus favored over the other enolic form. Another factor is intramolecular hydrogen bonding which stabilises the enolic form even more.
It can also be explained on the basis of acidity of H in keto from.
Due to presence of 2 Electron withdrawing groups, the H atom is highly acidic and will favor the enolic form.
The reason (3) is not formed is because after the formation of (2), the H marked in the 2nd picture will not be acidic anymore, making the equillibrim highly towards (2) form. Also, formation of the allene leads to leads to loss of comjugation, since the pi orbitals are now perpendicular to each other, which makes the equillibrim even backwards (towards 2nd form).