1. Can't tell you, because I don't know what you downloaded. I'm not aware of an official MS download for the boot floppy!?
2. If The floppy disk is just for booting. If this works from the CD/ISO that's fine.
3. "INS" is the shortcut for the "Insert" key. I guess VMware decided to use this key because it's usually located next to the "DEL" key.
André