I'm going to use some audiophile jargon since I'm bit pressed for time. If you don't understand something I wrote, please ask for clarification.
1. 320 kbps MP3 files sound pretty darn good but they use lossy compression which means there is still some loss of sound quality compared to the original source. That's because lossy compression means you're permanently throwing away some audio information in order to get a smaller file. PCM WAV files are uncompressed so there is no loss of quality due to compression. If you compare the audio spectrogram/sonogram of a CD track ripped as a 320 kbps MP3 to a WAV version of the same track, you'll see high frequency rolloff in the MP3 version. If you have a recorder that can record PCM WAV, you might as well record in a higher quality format.
Yes, you can convert from WAV to MP3 or any other formats supported by the editing/conversion software you're using.
2. A telephone pickup can record one sound source so the result will be mono, similar to how a "normal" audio mic records in mono. Stereo audio mics have two microphones in them so that's how they are able to record in stereo. So it follows that if you want to do a stereo induction recording, you'll need two induction pickups/mics. If you want to convert a mono recording so it "sounds" stereo, there's a simple technique you can use in audio editing software but I've never tried it myself.
Turn a mono track into rich stereohttp://www.benvesco.com/blog/mixing/2008/turn-a-mono-track-into-rich-stereo/3. Simple digital voice recorders usually have automatic record level controls because they are meant to record people talking (as their name implies). It's important to get what someone said, whether they are whispering or shouting

. But when recording music, having a consistent volume level detracts from the listening experience. If the composer/performer wanted the louder parts softer and the quieter parts louder, they would have performed it that way

. Automatic record level is a form of compression (it's compressing the volume level of the audio) and yep, this type of compression is also undesireable.
How to set proper record levels... your recorder should have a legible VU meter so you can see the sound levels of what you're recording. You never want the record level to go past 0 dB because that means the sound is too loud for the recorder to record properly. That results in "clipping"; it's called that because if you look at that waveform in an audio editor, the tops of the waveform envelope above 0 db are missing and are just flat lines like they had been cut with scissors. If you listen to clipped audio, it'll sound distorted because of the missing audio.
So to avoid clipping the audio, you set the record level so the "average" sound level is well below 0 dB. That's called leaving "headroom" in your recording so louder parts of the audio won't be clipped. I usually go for what the recorder manufacturer suggests, which is -12 dB.
What's the "average" sound level? You'll have to monitor the audio with the recorder's VU meter for at least a few minutes to see how loud (or soft) the audio is. You should also monitor the audio while while recording with headphones or earbuds so if a very loud section of audio is played that results in distortion/clipping, you'll be able to notice it and know that it happened
before you leave the Park.

If you're recording a loop, you lower the record level to what you think/hope is a safe level for that section of audio and keep recording so you get a non-clipped version of that audio when it is played again.