1. Yes you can and they make interesting gameplay. link to a discussion on an all rogue party. http://www.grimrock.net/forum/viewtopic.php?f=13&t=2223
2. While certain races have clear class preferences all races are viable in all classes. Yet it does not spare you from paying attention to them.
Insectoid Natural Armor grants Protection +5. A proper trained and equipped fighter can pass Protection 80, specialists even 100. Keep in mind: in LoG Protection is pure physical damage reduction and only reduces taken damage, never nullifies it.
3. Whichever you want. Try hard first and if it's too much play in normal.