ANSWER: Your heating and air conditioning unit relies on air flow to keep the temperature in your house maintained, if your air filter or the coils on your unit are dirty this will increase the load on the components on the system and cause it to use more energy.
ANSWER: These settings are for the indoor air flow. The auto setting will run your blower only when the compressor is running therefore stopping the air flow coming to the thermostat when the temperature has satisfied. This could allow areas far away from your thermostat to vary in temperature. When you run it in the on position it will give you a more constant temperature throughout the area being cooled or heated.
ANSWER: Yes, it is a good idea to flush your water heater once a year. This will clean the tank of settlements that can damage the tank and cause the elements to wear out prematurely.