Hello Alexander
Looking at the topology pic, I’m not sure where the error is. The 192.168.123.0/24 network is shared between the three routers on interface Ge0/1 with IP addresses of .1, .2 and .3. Please elaborate on what should be corrected.
As for your other questions:
Actually, R1 is the DR as is indicated in the PIM debug messages on both R1 and R2. Although you are correct that the higher IP should be chosen as the DR, in this case, the DR is statically assigned. If you look at the configuration files of R1, R2 and R3 you will see the following command:
ip pim rp-address 1.1.1.1
This statically assigns the R1 router as the DR.
Cisco answers this question quite elegantly:
By default, switches that have PIM snooping enabled will flood multicast traffic to the designated router (DR). This method of operation can send unnecessary multicast packets to the designated router. The network must carry the unnecessary traffic, and the designated router must process and drop the unnecessary traffic.
To reduce the traffic sent over the network to the designated router, disable designated-router flooding. With designated-router flooding disabled, PIM snooping only passes to the designated-router traffic that is in multicast groups for which PIM snooping receives an explicit join from the link towards the designated router.
This comes from this Cisco Documentation.
I hope this has been helpful!
Laz