Its simple really nothing that complicated. The module uses Facebook's dialog API http://developers.facebook.com/docs/reference/dialogs/
1. Its functionality is similar to Facebook Share, but you will be able to customize the Facebook post. This will add a Facebook icon on the content types you want this feature enabled.
2. If you modify the content, the module will simply share the new stuff. That is if you share after the content is updated.
3. Let me explain the image scenario, If you see Posts in your Facebook's news feed, some of them will have a image in them. Most probably the stories published using applications. This image is that image. as for as CCK imagefiled. The module is under development and more tokens will be added in the next version.