Let me answer what I know.
1. Do I need to downgrade to 3.2 to fully utilize homebrew? Or, am I ok, since I did a modchip install? Does it matter what version I am on?
No you don't but you should, 3.2 is till the best version to run homebrew.
2. What is the advantage of downgrading?
Again 3.2 is the best version, 3.3 and 3.4 you lose some ability to do certain things.
3. If it is best for me to downgrade, is there a single post (I did search before posting) that gives me all of the informaion and the files needed to do so? (from reading it looks confusing on what iso and installs that i need to do.
Use this:
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4. Also, with a modchip, do a I need the starfall hack, is it recommend to install and use while utilizing a modchip.
If your modchip does not come with an update blocker, yes you should. If your modchip comes with one then it's to determine which one works better for you.
You will get better results playing back-up games with a chip, a chip usually lets you play about 70% of the games out there, then you would use the softmod to play the remaining 30%.