5) What option is recommended?
If you are paying your adviser a fee for his advice and services, then you should be free to opt for a direct plan from the AMC suggested. Also, if he recommends a dividend option, as against a growth option, do not blindly go for it.
In equity funds, a growth option is definitely a smarter choice. As the value of your investment grows, so does the net asset value, or NAV. If the NAV is Rs 20 per unit and the fund declares a dividend of Rs 2 per unit, after the dividend payout the NAV falls to Rs 18. Your own money is given back to you. Dividends from a mutual fund is just the return of investors' money disguised as dividends- very different from the dividends you get from stocks.
There are exceptions. If you need need some cash inflows periodically, your adviser may suggest a dividend option.
The above questions are just guidelines to understand the thought process of your adviser. Don't shirk from doing so. After all it is your money at stake.