#1) Yes, you would use your Ethernet connection to download On Demand content from DishOnline.
#2) I have no idea what your setup is. I will defer to others.
#3) No, they will be up-converted. Hopefully, they will have black bars on the side unless the folks at TBS, Food Network, TNT, Cartoon Network, HGTV, A&E, History, Biography, Lifetime or Lifetime Movie Network broadcasts them. Then they will still be faded up -converted but with distorted faces and bodies in a weird thing called stretch-o-vision.
#4) Use an antenna and watch the CW and PBS in less compressed HD as well rather than just watching the big 4.