Proper implementation/use of code/syntax highlighting

I use a similar plugin called WP Syntax, which works better, in my experience, so I’m going to answer for that one:

Question 1: Do I have to type in the Visual window or the HTML window?

In the HTML window. I prefer the <pre lang="php"> mode.

Question 2: Does TinyMCE mess with this?

Yes, it will html encode special chars, for example transforming => into =&gt; etc. so you should probably disable the rich editor alltogether.

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