At the Create Ad Format > Get Ad Code section, I can see only Adsense is being served as 3rd Party Ad if no ads to display. Why not other networks? An option to add third party ad code as backup will help us who don't (or can't) use Adsense. Just a thought though.
Well.. I am not sure how to do that. Can you please tell me the process? And, as far as I know (may be I am wrong), search engines don't like iframes?
You don't need to worry about iframe, just make a blank HTML page with the ad code you want to display, use that page as the URL to display if there is nothing to run. As far as search engines not liking iframes, not really the case... AdSense uses iframes for it's ad delivery. Regardless, a search engine never sees the iframe because like AdSense, it's injected to the page via JavaScript.