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To your questions:
(2) I believe you refer to version 2.1, which is the current version for Kindle DX; 2.0.3 I believe is for Kindle 2. Yes, the USB Network Hack by ebs works.
(3) Nope, I experimented with converting from PDF to mobi but failed epically, and I was using the latest professional OCR software (i.e. OmniPage) for that purpose. PDF indeed is a very poor format for conversion. And so I can't recommend you the best software to do the job since it really depends on how the layout of the elements within the PDF is done.
(4) For PDFs, it doesn't matter what characters they use, it will display fine because that's just how PDFs are designed to work - display pages as originally intended by the creator no matter why it is. For other formats like mobi, I can't comment in it...
To your PS, that is easy. Just tell her that this is an eBook reader, which means it is beneficial since you can read more books anywhere and hence gain more knowledge; nobody can fault you for reading more, can they?
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