1. It's up to you Not extremely necessary if you keep IE 7 up-to-date.
2. Recovery console appearing at boot was installed by ComboFix to be exact. I'd leave it installed there.
4. Heh.. it's been really big while when I've seen and used Windows 3.x series version last time. Most modern malware is designed to attack newer OSes (Windows 9x and up). Also, if the system is not connected to internet then it shouldn't pose a threat. That's how I see it.
5. Having ATF Cleaner run occasionally and MBAM installed wouldn't be a bad idea.