Italian planes aren't that bad, better than the early German choices you get, as far as fighters go. Still nothing compared to the bf-109s when you get them though. The 110 seems to be somewhat hard to kill if you're just firing at it from the back, unless you get lucky, take out his elevator, and just wait for him to plow into the ground. If you've got the extra speed on him, try some over and under attacks to get shots in from the top and bottom.
Answers: 1, Only in historical or full realism. In arcade it'll just take away your WEP mode for a few seconds if you use it too much. In historical though, you can overheat and damage your engine by using WEP too much. Each plane is different as far as how much is too much, but most planes with cockpits have a fairly obvious temperature gauge. Try not to let it rise too much above normal operating temperature.
2, each ammo rack has a list of the shots that are in it. When the gun fires, it fires those shots in order, then repeats. So, for example. AP-AP-AP-AP-AP-T, would fire 5 armor piercing shots and one tracer shot, then repeat. Some of the racks can get pretty complicated, but in general the names fit them well enough to just ignore the exact loadout they have. I tend to prefer anything with more incendiary rounds in it, unless I know I'll be required to attack a lot of ground targets with my guns, in which case I'll switch to more AP rounds.
As for using the keyboard commands when in mouse aim mode: You'll almost never be able to get the same response out of the mouse as you will the keyboard if you need to do a hard turn. Just try doing a 180 turn with only the mouse and then do the same thing using the keyboard.
I've personally stopped playing for a while. I still go back in once in a while, because I do find this the best game out there of the type, but it's still got serious problems, especially in the area of Russian flight model bias and economy. I would love to be able to give the jets a try, but it just seems like I'll never actually make it to that point.