Holding the yarn in the left hand isn't 'wrong', it's called continental style and many many people use it, you may have seen other do english or 'throwing' with the yarn in the right hand, but neither is right or wrong. There's also several other different styles too. The color blips showing at the change is normal, and I think if you did them on the other side, they'd show too, it's because they show on the purl bump.
If you don't have enough sts to fit around the length of a needle, you'll have to use magic loop or single loop where you pull out the cord between sts to 'shorten' the length. Here's a video for single loop - http://www.youtube.com/watch?v=qyd0BkKC8tU - you can also search there for Magic loop, which is shown in the picture in the post above.
I missed that before, but I think p2sso is a typo. If you look at the line - k3, k2tog, k3, yo, k1, yo, k3, sl 2 knitwise-k1-psso, k1, p2sso, skp, there's a single dec after the k3, and another single one at the end - skp. But it would be helpful if you could name or link to the pattern and if it's free, we can take a look at it.
Sure, makes sense, but she might not have enough to make it long enough that way either. It's pretty easy to do over starting at the bottom, though; if it's not enough to fasten off, undo partway back and start the decs earlier.
Even if you can't get the same yarn as in the pattern anymore, you can sub something else that will knit up at the same gauge, the same weight class of yarn.
Yes, the no stitch boxes mean 'there's no stitch on your needles for this box' so you just ignord them. They're there to keep the chart squared up, place holders for sts that will be added later. So yes, purl them if it's a RS row, or knit them if a WS row. The chart is too small for me to read the numbers so I can't tell if it's for all rows or just the RS rows.