I'm a new Touch owner as well, received mine this past Friday, and I had the same questions.
1. Click Start->Settings->Buttons
The only button you can configure with the stock ROM is the camera button on the right side. It allows 2 settings, one for short press and one for long press.
I would imagine that a hacked ROM would probably allow more customization but I am unsure.
2. From what I've read most seem to prefer TouchPal. I'm using it right now and it is an improvement over the stock keyboard. Don't know how great it is as this is the only 3rd party KB I've tried.
http://www.cootek.com/