1) Once your hardmod to a Pandora, it stays a Pandora. You can use it as a regular battery, but you will have to each turn on your PSP via the charger first or use the MMS boot menu to reset the PSP into the FW. I'd recommend either a) buying a Pandora, or b) a new battery. Whatevers easier.
2) After you make MMS, and use it, you can do whatever with it. You can reformat it and it will be normal again. But you don't necessarily have to reformat it again to use it, anyway.
3) Yes. To make a MMS, just use a regular card reader. Or even the PSP via USB.
4) It simply will not work. You can't damage it.
5) a) I don't know why. I used my PSP to make my MMS. Go ahead and use your PSP. It shouldn't make a difference. If anybody else knows why not to, feel free to elaborate.
Hope it helps :)