it comes with a SIM. When you activate the phone your number will be transferred over to the new SIM. At that point your 3G will be "deactivated".
yes, you would activate it on her line. If an app is ios4 compatible, but not required, then yes it will work on the 3G with ios3 installed. if the phone requires ios4 for some reason, then no, it will not work.
when ios3 launched, almost every game/app remained ios2 compatible because the update was a paid update for the ipod touches. Being that ios4 is free and will only not run on first gen devices (i.e. very old devices), I would expect a lot more apps/games now to require ios4. obviously she can still upgrade for free when needed, but my guess is you will start to see many notable ios4-required apps in the coming months, and then a ton more once the ipad gets it.