1. JPG is fine.

2. Do not crop it. You can resize it, but you must keep the aspect the same. The object  the map you make to decide what part of it to apply to certain parts of the object (this is why the templates exist, to tell you where on the map to paint the colors for said parts).

3. Doesn't matter as long as you can find them. A folder in your name inside the Textures folder in the runtime is usually easy to remember, if you want a suggestion.

4. Yes. You will be looking for a node called Image_map. If there isn't one, create a new node. It's under 2D textures. You'll have to connect it to your diffuse.

花 | 美 | 花美 | 花火 
...It's a pun.