1) If you want to do any type of spectrum analysis it is important to have the Lorentz Drude model for dispersive materials.
2) Yes, you can have a larger domain than the slab or objects you have placed. Generally this is needed to keep some space between the absorbing boundaries and the interactions of the field with the material surface. Remember that a large domain will result in a longer simulation.
3) Gaussian modulated continuous wave allows one to simulate over a range of frequencies with one simulation, because of the broad frequency spectrum of a short pulse. The CW source is restricted to a single wavelength, but it can be simpler to determine the number of time steps needed. If you are not sure about which to choose, but you want some type of spectrum response I suggest the Gaussian modulated wave.
Regards