Kind of an old topic, but considering that this is probably better than making a whole new one to show off my favorite...
1. Omega. All the way. Smack in the middle of the ocean, surface available by laddering, instant boat accessibility, and near one of the ore caches. Only downside is lack of wheat/barley to start with but easily remedied with sailing to Beta. In addition, you've got a nice spot to jump right down to the lower mining levels, and since you're under the ocean, orichalcum. Did I mention the visible block of Iron Ore right on the rim?
2. In my Omega world I used Damascus Steel. Easy to get if you find copper and tin, though substitutable for normal Steel if you decide that heading into the tundra for manganese is worth it. On second thought, it probably is. I just lucked out. I suppose it doesn't help that I found Platinum and used that to skip directly to Desichalkos either. (I boated to the volcano island and performed Ultimate Tunnelling to get Deep Iron for soft metal)
3. I don't. Somehow I manage with a very cramped underwater biodome. Though if I did, it would likely be in the form of a wooden platform on top of said biodome. Or maybe I'll move my base to my cleaned up swamp island. Or the large amount of Mushroom Island I cleared out (and cleverly walled with Cobblestone Covers).
4. I like to prioritize getting a Kitchen set up ASAP, so that I never have to worry about that. Before my 'grace period' of "the last 2.5 hunger" went up though, Toast. Yesh.
5. My iron armor is almost broke. I KNEW my Atlarus and Adamantite mining runs would be for something! (In another world, I got Oureclase armor, and it's pretty good)