I figured I'd build just a room that goes down 1z level so that they can be in a type of pit for them to breed in.
Would that work?
Yes, it would work, but the moment you wanted to butcher any of your livestock, you'd either have to let all the animals out (they'd go to your meeting area right away and would have to be thrown into the pit again once you're done) or lock your butcher and tanner in with the livestock. Even if you did lock your butcher/tanner in, you'd still need to either re-pit your animals or cage them or something, which is why I don't consider it worth the micromanagement effort and instead recommend using chains/ropes.
A better idea is to have a 3-level setup for this sort of thing. Top level is a pit for dropping critters in, middle level is floored exclusively with at least 2 retracting bridges linked to levers and otherwise completely sealed off, and bottom level is accessible for your butcher/the rest of the fort.
This setup allows you to easily release part of your herd with a pull of a switch without needing to re-pit any of the other animals. Just pull the lever, wait a bit, then designate all of the now-stunned-from-the-brief-fall creatures for slaughter. Sure, they'll get to the meeting hall, but then get taken up and killed shortly, and you're back to an entirely animal-free fort. Better yet, you're (mostly) certain to still have at least 1 adult female still in the pit most of the time, which means you don't even have to micromanage to prevent the death of all of your breeders! Good stuff.
I can't for the life of me makes the 'form squads' keys work... Each time I draft dwarves, I get one-man dwarf... What is exactly the key combination I must use when I enter the military screen to have a squad of 2 dwarves?
Go into the military screen, scroll over a dwarf, hit enter, scroll over another dwarf, hit enter. You now have a squad of 2 dwarves lead by the one you hit enter over first. Adding more dwarves to the squad is as simple as scrolling over them and hitting enter. Hit space when you're finished making the squad.
I'm pretty sure you can put undrafted dwarves into squads, though if you put them into a squad with a drafted dwarf civilians will be auto-drafted.
How do I see the value of a room?
The (r)ooms menu lists all of your rooms, placed furnishings, stockpiles, and zones. For bedrooms, dining rooms, offices, and tombs, it also has their quality listed (Meager through Royal). This, unfortunately, is rather vague. You can't see the actual numerical value of a room until the economy activates when the tax collector arrives.
Also, there is a button to modify posts at the upper-right corner of the post. It's widely felt to be rude to double-post when such things exist, so please use it