The old "most-recent" version doesn't work unless you use VirtualKey, but there has been a minor update that does indeed work with touch screen S60 devices. I don't remember the specific model numbers, but the increase was like from x.xxx.20 to x.xx.30.
No, 5th Edition has the same access point grouping features as FP2, so you shouldn't need Psiloc Connect.
No, you're right, but that's hardly the only reason a lot of people are more excited about it than the N97.