Yes, additionally you can restrict an option to pay with store credit by another store credit product. All these things can be done in System > Configuration > Store Credit > General. This feature is configured on a store-view level:
Yes, of course. This is the best part of this extension as users will get a refund to a store credit balance (regardless of the payment method initially used by the customer). This way you turn them into new sales.
You need to create a store credit product in Catalog > Manage Products, the process is similar to a simple product creation. Once you complete all the steps, a product named “Store Credit” will be available in your store, and clients will be able to purchase it.