To reply to a message, simply press the 'r' key while reading it. VM will generate a reply for you. To quote the message in your reply, use the `R' key to start a reply, or, once in the mail-composition buffer, use C-c C-y to insert the message text.
You may wish to use Supercite (included with Emacs) to generate some different quoting styles.
Yes. Please see MIME section of the FAQ.
To display graphical smiley-faces in VM, place the following forms
(require 'messagexmas) (require 'smiley) (add-hook 'vm-select-message-hook '(lambda () (smiley-region (point-min) (point-max))))