1.) That's how I prefer to do it. Although you should always keep a backup, it's nice to be able to reformat your hard drive should the OS go south without worrying about deleting all of your personal files.

2.) Usually not a good idea as most programs look to a specific directory to load their settings from and may malfunction if you move them. Then again, if you don't mind redirecting each individual program, and hunting down the registry keys as necessary...

3.) That's exactly it...Microsoft decided to separate the 64-bit and 32-bit software, which is particularly beneficial should one program have both versions installed. (Internet Explorer is one preinstalled example.)

Hope this helps,
John