Your system can handle 4 IDE devices without aditional hardware. CD-ROM and Hard disks use the same connection, so you can hook up 2 hard disks, 1 CD-ROm and one CD-writer (CD-RW). Instead of a CD-RW you can also connect a DVD-writer.
External units are usually slower and far more expensive. So if you can hook one up (the cable you described is for power, you have to look at the grey wide cable with black connectors) internally, this would be the preferred choice.
You can buy drives online at sharp prices (check out our Bargain Basement forum also) or in most hardware shops nearby (just look around for prices, so you don’t pay too much).
With most writers software is included, but that will not always be sufficient. Some writers come with decent software (like Nero), others don’t. Regardless of your writer, you can always buy additional software that specialises in certain features, such as backing up copy protected software. IN this respect I would like to recommend Alcohol 120% and CloneCD, learn more in their respective forums here…
Question number 5 is too close to illegal activities which are not allowed on this forum and thus I cannot answer that. But for sharing files I would recommend Kazaa, provided you use it for legal purposes.
Finally, read other people’s postings, use the search frquently to learn more about certain specific topics…you’ll find a lot of information here.