Collection, in and of itself, isn't helpful to a horse. It is a special way of going that increases the work needed and probably increases the risk of injury - as does any motion not based on the individual's body and mechanical efficiency. Think jogging for long term health, not fast running or ballet.
Muscle can absolutely go away. If you don't use it, you will
Horses have phenomenal memories. A horse with a bad habit will continue in that habit for a long time.
You've described two separate issues with separate solutions. There is no "hollow back". A horse who hollowed his back more than an inch of so would be in danger of breaking
his back. However, they can brace their back, tightening the muscles to make it rigid so they WON'T hollow and break their back! Bandit was a classic example: Ridden at 35-40% of his body weight, he protected himself by turning his back into an I-beam.
The solution? Good saddle fit and riding light. Peak pressures posting are actually the same as sitting, just half as often. Two-point - standing in the stirrups and flexing the leg to spread the shock out over a longer time - reduces peak impact by 20%. Lots of two point, including at a canter. Use a Forward Seat and match your balance to the horse's instead of trying to train him to adjust his balance to get it underneath you. As the horse learns you won't hurt his back, he'll start using it more like he does without a rider.
The neck issue is caused by abuse with the bit. So don't! Ride with slack in the reins or go bitless. I prefer slack because you can still abuse a horse's face bitless.
People need to stop worrying about the poor horse's head position. That has as much to do with their desire to see well as anything else.
Stargazing is a bit avoidance caused by abusive use of the bit. Initially, it can be countered like this:
"One rule which is unchanging in regard to the action of the rider's hands, but not in regard to their position, is as follows: Whenever the horse places his head in a position other than the correct one, the hands are moved to where they can increase tension on the bit and make his mouth uncomfortable. In these cases, they must be so placed that the horse cannot possible escape the bit's tension for a fraction of a second, until the rider permits it. When he ultimately seeks to avoid discomfort by putting his head in the correct position - and then only - the hands must soften immediately...In the first instances, it is better to let the reins go slack when rewarding the horse...
...take the case of a stargazer...Most riders attempt to lower the head by carrying their hands low beside the horse's neck and futilely trying to pull the head down. The horse, by tipping the head a little further to the rear, can momentarily escape the tension of the reins...he will, of course, continue throwing his head as long as he succeeds in escaping the annoyance of the bit, even though it be only for a moment. In other words, he is being taught by the momentary reward he receives, that his procedure is correct.
The correct and logical way to lower the head of such a horse, is to hold the reins short enough (and no shorter), so that it is impossible for him, by any means, to escape the bit for a single moment. The hands, instead of being lowered in an attempt to pull the horse's head down, are raised, so that, as usual, the forearm and the rein make a straight line.
The tension on the rein must become greater than the normal feel. The hands are more or less fixed, and vibrations may be simultaneously employed, all of which increases the horse's discomfort. The legs compel him to continue at the gait at which he is moving, while the hands steadily hold the head in its elevated position. Sooner or later, he becomes tired and uncomfortable in this strained position. Also, he soon discovers that the usual throwing of the head permits no escape from the bit; and begins a search for a new way. Finally he will endeavor to lower it to a more comfortable and natural position. Instantly the hand softens to permit the lowering.
" - Col Harry Chamberlin
If the horse trusts us with his back and his mouth, the bad carriage will fade away. FADE. A horse who doesn't trust will take time to trust. And a horse who is used to moving like A under saddle may need encouragement to start moving like B. Some geniuses might be able to do that with bits and rein pressure and teaching a horse, but the safest and most certain way is to give the horse opportunities to move right - while doing transitions, turns, hill work, etc.
My perspective is of an old guy who has become fond of bodyweight exercises (and a life-long jogger) who has become convinced that trying to imitate a top athlete is a great way to be injured! And none of us have ever run or trotted on 4 legs. Most of us don't know how the HUMAN body moves, let along the horse's. Ride light on the back and get out of the mouth and wonderful things can happen.