Can I have a clarification on this?
1) I presume, that I have to play a card (attack) from my hand and only then I can use this hammer. Can I use the hammer (roll) first to see, what card(s) I have to use to accomplish the test?
2) On the card there is no restriction as to the number of rolls/uses I can have. Does that mean, that if I am lucky enough I can boost the attack multiple times? With few diamonds/rerolls I could get easily a lot of REDs.
You don't have to play cards to initiate an attack. You pick an Assault action on an entity tile/map tile, then you can choose to pay for it however you like. So yes, you can start with the Hammer, roll the dice, then see whether you need to start discarding cards.
You can use the Hammer multiple times. There's no restriction on it (besides "Assault actions only"). The downside is you risk discarding it/losing it to the item market.