OS question - about to install PSISM CF reader for XL

So, I've had the PSISM CF reader lying around for a while now and I'm finally getting around to installing it.

I have a couple questions that I'm hoping someone can answer:

1) Should I update the OS to 1.2? (I've heard some ppl say that 1.2 is actual worse than 1.14, anyone know if this is true?)

2) Can I put other files on my OS flash card besides the OS file?

3) If updating the OS to 1.2, should I do this before or after installing the CF reader?

I watched the youtube vid by mpcstuff.com but I'm still a bit confused about updating the OS/putting the OS on my CF card. I assume that I just format the CF card to FAT32 on my computer, put the OS file in its root directory, and insert the card into the MPC after installing the drive. Is this correct?

Thanks for the help...

3) If updating the OS to 1.2, should I do this before or after installing the CF reader?

definitely after, if required of course
for some users 1.14 works just fine
stay at 1.14 untill you are finished

for the rest of your questions - search forum, it's been answered in details before