1) I have no idea. It's probably something that the text file processors that SUN uses understands.
2) You should be safe as long as the text files you generate with wordpad are viewable with notepad and any other simple textfile editor. Why don't you use the IDE for writing the choices file?
3) You should at least provide javadoc for protected and package access level methods. Everything that another programmer which uses your jar can see should be documented. Some people around here even provided javadoc for private methods. Maybe you should search around a little before asking.
Also, I did not put this in my choices.txt but I did document private members (especially private inner classes) on the basis that if they were refactored out and made visible, then the documentation would already be there. Plus, more documentation makes it easier for the hypothetical "junior programmer" to read.