Yes, you can use it in video mode. Just flip the switch on the lens.
How big of a difference will it make? That'll depend on how you're shooting. Whether you've got a shoulder mount going on or just hand held... It can't eliminate all shake, just reduce it.
If it's a static shot, i would switch it off. Though, i know a lot of ppl leave it on at all times.
YES. I have some older prime lenses and I want to only use them on a tripod, otherwise, shaky video. When I pull out my Canon 18-55 w/ IS, it is safe to use handheld or on a poor man's steadicam.
If you are going to go the DLSR route, I suggest having one lens have IS, the 18-55 kit lens is fine w/ me. If you go longer focal length, it is not good to go handheld IMO