Swap: Well, really its up to you.
In as much it depends on how much ram you have and whether you want to hibernate.
You actually don't need swap for the operating system to run quite happily, on computers with 2G memory or above.
You'll find on most machines very little swap is used for general usage, maybe for something like video transcoding may use it; but on my old
Athlon 64 X2 4000/ 2Gb I never needed swap.
It is however recommended to use swap and as such I would normally use it.
The video is specifically for an external harddrive however, it is exactly the same procedure to install to a flash drive.
USB FLASH memory has limited write life - it can only be written to a certain number of times. Flash drives are a lot slower than even an old harddrive, so writing to swap can slow it down and of course will shorten the life of the flash drive. You need to use the fastest dirve you have - I use Kingston data traveler G3's a 16G is about £/$8
If you decide not to use swap, you should also setup a RAM drive for the stick so that Firefox or Chrome reads and writes its stuff to a temp file in memory.
Using a flash drive will be quite slow when doing an update but for day to day usage - browsing/docs/testing it will be OK and of course you'll have a complete install to test out.
1. Will a 8 GB pen drive do for the installation? YES
2. Should I allocate swap with this pendrive? No (8 GB), save the room for operating system and home.
3. Once installed can I boot from the local HDD and from windows can I format the pendrive as normal? YES