Custom URLs use some commands (different than the modrewrite commands) in the .htaccess as well, so don't remove that file.
And since you are leaving the modrewrite urls intact, old urls will continue to work, and search engines will discover your new urls. The only problem you would have is if you make your custom URLs overlap some old modrewrite urls, but you are probably unlikely to do that.
If you don't use a date in the URL, you simply choose the "force unique" checkbox on that page, and "you" don't have to think about keeping them unique - the software will append a "2", etc. if you ever use the same title in a post.
As for what your format should be, I like having it on a separate domain or subdomain, and then you don't need the {blogname} in there at all. I don't particularly like the .html part, so I'd leave that off. I guess it is easy enough to see what I like, by looking at my blog http://jon.limedaley.com/ and my company page: http://limedaley.com/
