1. I have no issue with any Japanese Mega CD games. You'll definitely want to make sure Mega Key is OFF, otherwise it will cancel out the automatic region and PAL/NTSC switching on the Sg. That's the only setting change you should have to make on the MEP. I don't use the jailbreak firmware on the Sg, though; maybe try going back to the official 4.7 release if turning of Mega Key doesn't fix it. I should also say that every BIOS version I've tried has worked equally well.
2. My MEP fits perfectly every time. Never had an issue with it seating properly. Solid and stable, and I routinely leave it installed while ejecting the microSD card for updates.
3. 32x will work with the Sg now, as long as you have the DAC as well. Because it needs the analog overlay video cable, you can't get the 32x video via HDMI.