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 => etc. so you should probably disable the rich editor alltogether.