Question one - try putting the router on a telephone extension on the second floor. Depending on the quality of the extension cables it may work. If no good post back - you need a signal booster or another wireless (bridge) router somewhere in between.
Question 2 - you need to enable encryption on the router either WEP or WPA (Better) have a look in the manual or post in the Network Forum.
Question 3 - I need help on this one!