i'm an american who successfully acquired italian citizenship about five years ago.  

1. this questionnaire is the easiest one i've found online: http://italiancitizenship.info/

2. i had to show every birth and marriage certificate of everyone back to the ascendent i acquired citizenship through.  i also had to show a naturalization certificate proving my grandfather was born *before* my great-grandfather naturalized.

3. you can keep both.

4. eu citizenship does not automatically mean you can work anywhere on the continent.  you have freedom of movement, but specific employment laws are set by each eu nation

buona fortuna!