Thanks for these great questions! Here's some answers in order you asked:
1. Usually a 4x scale works well, so 640 x 576
2. All four will be accepted/used in the Gallery unless we get a tonne of submissions, then we reserve the right to select which ones we think are our favourite - though with that in mind I think we'll add an option in the submission fields to set an order of preference for participants.
3. Yes please! Add the border to make it 160 x 144.
4. Grayscale/Greenscale are both acceptable. As long as it's four distinct colors it will be converted to standard colors when imported into GB Studio.
5. No - whatever the Game Boy Camera renders is acceptable.
And to your edit - the final image is exactly what we're looking for!
Hope this helps.