its the shaft that goes between the distributor and the oil pump. if the old one comes out w/ the distributor i'd change it out, but if it still has the clip on it you'll have to take the oil pan down to get it out, in that case dont worry about it. the only way to find out is to pull your distributor out, so wait till you start tearing it down to see what you're goin to do.
Actually I use AutoZone, I used to work there when I was in college, lol. They all have good parts and bad parts, you get what you pay for. Never get the store's value brand. No matter where you go its gonna be basically the same stuff.
intake gaskets too. if you get a head gasket set for a cobra or 5.0 explorer you'll be good to go. if you run headers get the Mr. Gasket header gaskets, the ones in the felpro kits dont do too well w/ headers
it depends on the cam. a 1.7 is longer from the pivot point, therefor it pushes the valve down further and keeps it open longer. e cam lots of people run 1.7s. only thing you've got to look out for is piston-to-valve (ptv) clearance since your valve is opening further. a cam that is safe with 1.6s may not work with 1.7s.