1) yes, if that is what you want the user experience to be.
2) either that, or install a local copy of php and mySQL so that you can test on your home computer. They are both free and relatively easy to install, although a true newbie have been known to take a couple days in the effort. You might want to get the WebAssist database starter kit. It walks you through a lot of what you need to know.
3) Don't use word. Use notepad or wordpad, both of which will allow you to edit .php directly. Or download Dreamweaver... they have a free 30 day trial.