I have the Hayes bleed kit. You do not strictly need their kit, although they have the right fittings to adapt to the levers which makes it easier. Otherwise it's just plastic bottles and tubing, nothing fancy.
I replace my pads typically twice a year normally, sometimes just one. I use the cheapest Hayes OE pads, they work best and are the most quiet for me. They cheap ones are organic and don't tear up the rotors as much. I deviated on my current pads and went with EBC green. I hate them, squeal like crazy, dirty with brake dust, glaze the rotors awfully.
Yes, catch bottle at the master (handle) and fresh in through the caliper. It's a closed system and so you want the air bubbles to rise, which is why you tip the bike up and flip the levers up. Inside the levers is the master cylinder and it's got a diaphragm to compensate for expansion, but no reservoir like your truck brakes.
Yes, DOT3 or DOT4 is fine. It's DOT5 that is bad. I couldn't tell you if DOT5.1 is OK in Hayes, but DOT4 is preferred because of it's higher boiling point. There's not a lot of fluid in the system and they do get very hot. I've had DOT3 get mushy on my bike and I am far, far, far from gonzo. Nice thing is the small bottle at Autozone is a pint and you can bleed half a dozen MTB systems with it, so get your riding buds, a 12'er and do all your bikes at the same time.
And yes, there is a good chance you will spill some, do it in the garage and have rags ready to keep from striping the paint off your bike. Otherwise, it ain't rocket surgery and after fumbling through the first time it'll only take you a few minutes to do after.
"Why does the U.S. care which flag will be hoisted on a small piece of land thousands of miles away?" -- Ron Paul