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Have a client in the exact same situation. Check to see if you are currently getting traffic for terms that would be specific to having separate pages (e.g. "50 blue bic pens" versus a more general "bic blue pens"). If you don't, then you should canonical to one page. If you do, I'd keep it as is and work on diversifying the product pages more.
#1 - That's probably too many links to have in the sidebar. I would make a link to a "Useful Articles" page and categorize the articles there. This does depend on how you want your visitors to flow through your stie.
Yes to #2. Link with keyword rich anchor text too.
#3 - only if those articles help your website accomplish its goal(s).
First big problem - You have a bunch of pages that look like this - http://fastlocksmithdc.com/automotive/car-keys-made/ford/
Not only are they duplicate pages of the other car URLs, but the pages are also blank. This really thins out any links built to your site by having a lot of worthless pages.
Secondly, lock smithing is a local search and should be attempted to rank for using Google Plus for Business pages. You don't have your address anywhere on the site (I recommend adding it to the footer).
Your best use of $200 would be to optimize your homepage/site to rank for keywords locally, setup/optimize a Google Plus page and then build $200 worth of local citations.
Go to webmaster tools and do a "Fetch as Google"
If you see the content in the source, it will be crawled.
Organic visits to landing page would probably be the most useful
You can install on windows but its more complicated than Linux.
The main thing you need to do it make sure the new URLs are the same as the old URLs (play with the permalink structure). If you do that, rankings shouldn't be affected.
If you can't get the URLs to match up exactly, make sure to set up 301 redirects from the old URLs to the new ones. You may lose traffic temporarily while Google adjust to the new URLs, but should bounce back within 2 weeks.
If there is custom coding involved, you'd need to convert to PHP.