Hello Sahil
An ABR will generate type 3 LSAs in order to inform other areas of the routes that are found in a particular area. Type 3 LSAs are sometimes known as a summary LSA, that summarises all networks within an area. A type 4 LSA is used to inform other areas of the existence of an ASBR.
Yes, only types 1 and 2 are allowed within the TSA. The ABR doesn’t send any type 3, 4 or 5 LSAs into the TSA, however, it still does send type 3, 4 and 5 LSAs into the other areas it is connected to that are not TSAs, informing them of the networks within the TSA.
When you use the default-information originate command (either with or without the always keyword), the router will generate a type 5 LSA. This means that you should indeed have an O *E2 route in R1 of your topology. Can you verify where you are applying the default-information originate command and where you are seeing the O *IA route and let us know?
You will see only a single “Summary Net Link States” entry which is that of the ABR. This is necessary for the stub router to know how to get out of the area. No other entries will be there since no Type 3 LSAs will enter the area from other ABRs.
I hope this has been helpful!
Laz