I put together a video for you showing you how to use the content template in Gravity Forms, which is the key to formatting content within the post body.
Take a look here: http://www.screenr.com/sYT8
If you find yourself needing to do more advanced work, then you’ll probably want to investigate setting up a custom template and pulling in the data from the custom fields directly into the template.
As for question #1, it sounds like the field might not be properly configured. Can you post a screenshot or video of the settings?