1. I just selected the SMI folder and it worked.
2. Yes, direct ScummVM to classdub or rename and move classdub to somewhere else (probably the ScummVM folder).
3. Any version probably will work just fine but I believe LucasArts used the CD version for this remake.
4. Do you mean the new CD audio files? They don't get converted. You have to do that separately and figure out the order that they go in. I tried just renumbering them (subtracting one from each track#) but that didn't seem to work entirely. I still haven't figured this part out entirely. If you mean the original audio files from the original SMI, then those are the ones you are hearing behind the new speech.
I hope that helps.