#1 I read in a post on debian-knoppix mailing list from Klaus that he has got it to boot KDE on a 486 with 32mb plus swap (it takes about 10-15 minutes) so I can not see why not, I think recommended ram is 96mb for kde so it probably will be slow.

#2 I believe you have to boot and use an option from menu although if you could find the script that creates the swap file you should be able to run it from a text boot. If he used something like Partition Magic he could resize his windows partition and create a linux swap partition.

#3 It scans for swap on boot at least linux swap and I would assume fat if you made one I don't use fat so I have not checked into it.