(You need both files -- code gets updated more often than data, so I'd rather people update the smaller file more often.)
2) No, it's based on 1.0 release.
However, to get the full benefits you MUST start a new save game. It's (so far that I've seen) OK to install the patch and continue your game, but you won't get all the new goodies.
Bugs or suggestions for that patch should be posted at