1. Yes
2. Pump the lava straight up would be a lot easier.
3. Yes, you store them in tanks. I think you can just pump lava straight into the generator, too.
I made a similar build and added a locking system to it using a extra OR gate, one input is the switch and the other links to a redpower computer.
Lock-1 IOXSET
Unlock-1 IOXRST
I am confused, what form of power do you want? Buildcraft/Indutrail craft?
Pipes and engines are for BC, cables and generators are for IC.
What in the world is a generator engine?