Can you put a different tube of chapstick in Spiderman?

No, a regular shaped chap stick will not fit. The provided lip balm is oval not round, has a push up lever on back. However, If you know how to melt chapstick and make a new stick you would be able to replenish if you use all that is provided.

When the stick is all the way down is the chapstick suppose to be at the top?

I can't speak as to wear exactly the chapstick sits exactly, it's a self contained unit (I'mguessing when retracted it sits about in the middle) . You slide the knob up and it pops up, you pull the knob down and it slides back into the toy. You do not see the chapstick when it's retracted.

Does the top stay attached if i apply to keys

The top is removeable. It detaches completely. It stays in place really well when put back on.

The lip balm is only at bottom when pushed all the way up

You may have gotten a defective one because I purchased 2 last year as Christmas gifts & the kid's loved them & had no issue's. I would send back or get in touch w/Amazon & explain your issue, they're very helpful over the phone. Probably issue you a credit plus extra for the inconvenience. Give them a call it never hurts. Merry Christmas & good luck, you'll get refunded if you call.