First of all, yes, your post is long, but that's what makes it so easy to answer! All that information is very helpful! Okay--
Question 1: Yes, using more rows in-between increase rows is a good idea. It does say that after finishing the increase rows, you just work even until you hit 19", but separating the increase rows a bit more will make the lengthening work better, where the elbows fall will be better, etc. So, great idea!
Question 2: I always use M1L no matter which side of a sleeve, thumb gore in a mitten, etc., I'm doing and it always comes out well. But doing one on one side of the marker and the other kind on the other side will ensure that it's very even, so yup, go for it.
Question 3: Ah, I think I understand what you're saying
-- and I think you're right
. Just work the increases into the pattern as you go. So lets say that you end the row with K5 P2 (not including the seam stitch, etc.). The next increase row you would just K5 P2 K1. The next increase row you would K5 P2 K2, etc., until you had gotten to a full K5. Then the next increase row you would add on P1, then the next, P2, then the next K1, etc., staying in the K5 P2 pattern. Hope this doesn't confuse you more, but I think you'll see it work as you go.