First of all, you should always try to do this on a dummy site. Create a copy/backup of your installation (both files and DB) and fire it up somewhere. Attempt to upgrade and test it. Do the necessary testing and look for problems / inconsistencies. If everything looks ok (shouldn't be no problems, but hey - better be safe than sorry, eh?), upgrade the live site.
1) Should be possible to do without too much hassle. 2) Yes, but first, you'll need to upgrade your site to the latest 3.4.x version. When you've done that, follow the upgrade steps that are outlined on this page:
3) Recommended? Yes, 3.5 is a huge leap forward. A lot of improvements have been made, not to mention a lot of bugfixes. However, this doesn't mean that you must upgrade.
