1. I would not use that flange unless there were some overriding reason to do so. If you have cast iron pipe, I would only use a caulked on cast iron flange.
2. Caulking the gap prevents "things" from going under the toilet, and helps keep it in place, especially if you had to shim it.
3. The rule of thumb is to tighten it enough so it does not move, but not so tight you crack the bowl. Unfortunately, the only way to tell if you tightened it too much is to crack the bowl, you have to use your instincts as to when to stop.