Here is what I think:

1. I haven't had that particular problem because I have worked within the same government agency up until about a year ago and so whenever I looked for advancement it was within the agency and everybody knew and approved. When the interviewer asks this question at this point, I don't have to worry about it because I am not working. (Well, for the next two weeks anyway)
2. I think, with permission, that these would probably make the best references because they can give first hand accounts of your work habits, your attitude, your ethics, your morals, your knowledge of the product and company, how fast your response to the clients questions has been, etc.
3. There have been some major changes in the way things are done regarding interviews now. The biggest change is the background check. I have always been subjected to extensive background checks which included criminal, credit and moral. But nowadays, even the private companies are doing almost as extensive checks as the government. There seem to be more and more complaints that I have been reading regarding recruiters and interviewers who don't return phone calls, leave you hanging regarding the position you interviewed for and, in many cases, act like they don't know what the heck they are doing or they are looking for. (These are mostly HR ninnys who are just screening for the actual hiring manager and make the weirdest decisions about who is good for a second interview and who isn't). Drug screenings have been becoming more and more popular and pre-hire physicals. The things that haven't changed as much are the interview questions, how you present yourself, what you bring with you, the thank you cards/letters/notes to the interviewer, the follow up, your choice of clothing and the rest of the basics. Actually, no the follow up has changed a bit because now your choice includes email if the interviewer has one.