Lots of questions that will result in lots of different answers. The best answer is to try everything and see what the results are.
Yes, you should go for the 133/266FSB setting. You will get better all around system performance running at 133/266 than 100/200. But you can't do it without unlocking the L1 bridges on that "B" type CPU. At least I don't think any "B" type 200Mhz chips come pre-unlocked already.
If you go for the 133/266FSB setting then you will have to lower the multiplier from 10, and unlocking the L1 bridges is the key to this.
The overclocking section of the FAQ will tell you, or send you via links to, everything you need to know-how-to's for unlocking the bridges, and pictures of the bridges etc: KK266 FAQ Overclocking Section
As far as what to expect from your 1G, the CPU section of the FAQ has some links to articles about the CPUs and which perform the best. How far you can go will be determined by which stepping of CPU you have, how much voltage you are willing to give it and how good your cooling is (sk-6 is good).