Well no, it DOES work with Polearm Master. Wielding the appropriate weapon, a creature enters the 'reach' and an AoO is triggered. War Caster then kicks in, and the player is given the option to replace the AoO with a reaction spell. The player chooses that option, and a spell is cast.
Mearls (it was him, right?) said the RAI was that the Polearm Master AoO was intended to work ONLY with the wielded weapon, however, the RAW doesn't even really suggest it, it just says AoO without specificity (a specificity that is commonly found in other wording throughout the book).
It's the logical conclusion of the War Caster feat. So long as there is an AoO, it can be replaced with a reaction spell, unless it states otherwise (and there is no RAW otherwise).
That's the grey area. Because the character, according to RAW isn't given reach, but rather the weapon is given reach, for the purposes of attacks. The feat references the character's reach, not the weapon's reach. The character still only has a reach of 5'. I would say that the RAI was that the AoO happens at 10', but I also wouldn't expect my DM to buy that, he might go by RAW.
It works with Polearm Master at 5', not 10'.
The Reach property effects how far you can attack with that weapon.
When you make a War Caster spell reaction it is not an AoO (it's instead of an AoO), so you aren't using your weapon to make an attack and thus Reach isn't part of the equation.
Both Rules as Written and Intended say the combo (10' distance spell reaction) doesn't work. DMs can obviously houserule otherwise but the default doesn't allow it.