1) In a “regular” distribution, you could choose to only install security updates, but since they are not designated as such in FC, that would be hard to do. So you are left with installing all updates to get the security updates.
Because of the experimental nature of FC, there tend to be lots of updates. In general, it is safe to install all available updates, but you will occasionally have a problem with one.
The problem might be a new kernel that won’t boot, some application feature that stops working or an update that won’t install due to dependency issues. Since you won’t be the only one with the problem, a fix will usually become available in about a week.
Some people avoid kernel updates, as long as the system is already running OK. It’s a personal preference thing.
2) Nope, everything’s normal. Exit the program and the terminal prompt will return.
3) Don’t know, but you can install a terminal option into the alternate menu (right click) by running:
# yum install nautilus-open-terminal