Login-box inserts into all your pages a "lightbox style" login form, that can be opened with Ctrl + E, making faster the authentication proc
Try logout. Login-box doesn't work if you are already logged.
Read steps 3 and 4 in the Installation section.
Yes. Just use the link syntax:
<a href="http://www.myblog.com/wp-login.php" rel="loginbox-toggle">Make the box!</a>
But if you eat HTML and CSS in breakfast, see the files of the default Login-box themes. It's easy, I assure!
Maybe the best way is go to my blog (http://danillonunes.net/en/tag/login-box/) and send your question as a comment from one of the posts about Login-box. Alternatively, you could send me a private message (http://danillonunes.net/en/contact/).