Haha--never heard that one before.

As the other posters already mentioned, you want Mac OS Extended (Journaled). Here's an Apple tech note which explains file system journaling:

http://docs.info.apple.com/article.html?artnum=107249

The case-sensitive options should be avoided at all cost. It would be better if they didn't even show up without having to jump through hoops.

Partitioning is pretty much a personal choice. It's not necessary. You can do it if you prefer to keep separate partitions for different uses. But the problem you run into is trying to anticipate out how large to make each partition without running out of space for future use.