1. they just mean you're phone needs to be rooted
2. /system is a directory in which the android OS is kept. not sure what guide is telling you need to go in there do whatever.
3. Terminal Emulator is a terminal for your phone... go figure. The free one is kind of sheisty. Press and hold menu key to bring up the keyboard. You don't need this though.
4. no
4. if you want to use metamorph with stock rom. i suggest you use this flashable zip form this
thread.
all custom roms for cdma hero currently have busybox already pre-packaged with the rom, so you could always do metamorph after flashing custom rom however there aren't really any metamorph themes for cdma hero. most devs create them as flashable zips. which might i add is really simple just enter recovery mode. and select zip, press home to confirm install.
with that said it is not harder to install flashable themes imho
with that said, i think you're making this way harder on yourself than needs to be
