I never performed that specific exercise, but it is listed on ExRx's database here, with alternative technique here. Generally, I trust that website (it is recommended by the ACSM, so it's not just your average website).
To answer your specific points:
1) Both can be used but I'd say that facing the machine is better. It probably makes the resistance direction (which is near vertical if you face the machine, as in the first link) closer to the movement direction.
2) Assuming that you use this exercise to isolate your abs, you should put your arms in a position which is as favorable as possible, which in this case means bending them and placing your hands on top of your head (see the link above) if you are grabbing a bar, or on the side of your head if you are using stirrups. Extending your arms will work your shoulder and arm muscles isometrically if you keep your arms rigid; if you don't keep them absolutely rigid, your arms will help your abs, defeating the point of the exercise.
3) Yes, you should treat it like a crunch. As that link says, "movement occurs in waist, not hips". Your torso should bend throughout the exercise. The most important distinction is to ensure that you are bending your spine: think of bringing your upper chest to your groin. You should NOT bend at the hips, as you would in a bowing movement.
4) This will somewhat depend of your body proportions but the first link I gave uses something like 67.5.
5) That link has a few more pointers, but I think the major points were covered here.