1. The mentioned disc probably is the one with the update tool and usb driver. But discs are not be given anymore these days as you don't need them in most cases and otherwise can download from the web.
2. If your player can be accesst, the connection has been made. Don't pay attention to this message then
3. It's logical only one drive is only visable. Your player has a (micro ?) sd slot, if that doesn't contain any card, you can't open the drive
4. How to update can be found here in the first post, download the manual and go to the last chapter: viewtopic.php?f=24&t=13607&start=0
Still watch out with updating, there has been some trouble with newer players and incorrect firmware on the JXD site. You also probably have the newest firware. If it's dated at the end of july 2009 or newer, don't update. You have the newest version anyways.
About video, try to decode at the screen resolution and go for AVI in divx decoding. Xvid gives sync problems when scrolling to the file or bookmarking. Also be ware that your files don't contain one or a few missing or faulty frames (direct internet downloads have these issues some times, decoding yourself is because of that the option and will work also for the downloaded files), if so the players stops playing the video and goes on to the next.
5. Can't say anything about this, my JXD300 gives you about 3 hours, so not that long either.....