(2.) I have heard you can use "0.0.0.0" instead of "127.0.0.1" Is this possible?
In most cases, yes. Some people have found "0.0.0.0" to be faster in blocking ads than "127.0.0.1" I have not seen this personally, but I use Windows 2000 and an ADSL connection, so it may well work for the majority of people.
The problem with using "0.0.0.0" is that it may cause problems using any kind of proxy server, such as CookieCop Plus or WebWasher. For this reason, I do not currently use "0.0.0.0" in my Hosts file, but you may try it and see if it works for you. You can do this by opening the Hosts file in Notepad, and go to edit: replace (or press + H). Replace all the "127.0.0.1" entries with "0.0.0.0" and see if it works for you. If not, follow the same procedure but replace the zeros with the original number and your Hosts file will be back to normal.
Note: older versions of Notepad may not include the replace feature, and so you would need to use a different text editor. If notepad can not open the file because of size limitations, or if the replace feature is not there, then I suggest you download and try Editpad.
I recommend you backup your current Hosts file before making any changes to it though.