The Content Manager allows you to create your content in "blocks". Each "block" includes a headline and a text section and might include one or more images and links.
When you have created several "blocks", you can select a mail template (with your logo, colors, styles etc.) and place your "blocks" in the mail template. The system will then automatically create both the HTML and the Plain Text version for you.

Your images should be jpg or gif format, and they should be saved at 72 pixels/inch resolution and RGB color. Try to keep the maximum width of the images in the 200-300 pixels range to avoid overwhelming the content associated with it. Also, larger images take more time to download.
You can save images in Photoshop (or similar image software) by using "File," "Save for Web" which significantly reduces size and cleans any unnecessary coding from the file.
In the filenames you should avoid the use of spaces and dashes, but you can use underscores (_) to make your filenames easier to read (e.g. "gif").

Sending personalized e-mails increases your response rate because a person is more likely to read an e-mail starting with "Dear Peter" compared to "Dear most valuable customer".
Creating a campaign to 10.000 subscribers will generate 10.000 unique e-mails. Therefore you can replace certain text fields (like [firstname]) with the information you have on that particular subscriber.

No - and for several reasons. First of all people are still nervous about opening e-mails with attachments - even if it is only harmless images.
Secondly, the e-mails will increase dramatically in size if images were included in the e-mails compared to placing them on a server. Images in the e-mails are then "referred to" as placed on the server. The Content Manager deals with all aspects in this matter.