WordPress.org

How do I insert an image as a virtual file?

Right now you cannot, unless I include a javascript image parser into the media insert menu I plan to add, this will not happen soon.

Would if I want to have my file auto-formatted by WordPress?

You can call the auto-formatting functions directly from a file template, or use the one I have already setup called wp_post

Can I use other shortcodes in my files or vfile contents?

Again, this is taken care of in the template wp_post, but if you would like just the simple functionality of shortcodes, without the auto-formatting, then just make another template for that

Nearly any question having to do with formatting?

Seriously nearly every answer is going to be to just make a template for that. A template has access to all WordPress hooks and filters, and it can be as complicated or as simple as you want. Just look at the differences between link_uri and link. The template link_uri just outputs the URI to the file, this URI can then be used in any attribute or content of any HTML tag. The link template on the other hand actually outputs the finished hyperlink HTML using the same URI.