If the block you're building on is grass, it probably won't matter. If it's something else, I would probably just snip off one layer to show which part is a structure. Only problem is that it probably won't look great. This is just what I'd do - I would like to know what happens
Grass and dirt are infinite, so you don't really have to worry about that being part of the building. If it's on a natural structure, I'd recommend putting a sign that says where the structure starts and the natural begins. If it contains player made items, it counts for the structure. For instance, using a nether fortress for part of it would not count for the structure if the build was on top of it. Having built inside the nether fortress makes it count. If you don't put a sign, I will use my best judgement on it - but personally I would not leave it up to that. The idea is to build something, so it doesn't matter how you build it. If you'd like to make items out of your blocks go for it, but it counts against the total of the materials used. Whatever method you use to build it, as long as it's not part of the final submission, it doesn't matter. I'm only judging the end product, not what all you did to get there. I don't have a problem with food items, as long as they aren't turned into blocks in any way and used to build. That is correct, if you want to make stone brick, you must convert your stone.
No. You are making whatever you want with the materials provided. You can make a dragon egg showcase room, but that's not what the competition is about. You make whatever YOU want, as long as you don't go over the item limits. So get creative
You can - but the prize goes to whoever submitted the entry. It would be up to you to share it / do whatever with it.
For items that which do not stack, such as lava or cake, do you mean the amount they stack to (1 for lava and cake for an example) or a basic 64 for any item measured in stacks?
No. I'll be calculating it with the analysis/analyze function of mcedit. Edited by the grammar and spelling fairy =)
Paper comes from reeds / sugar cane - and you can make as much as you'd like. The wood is still controlled though if you're making bookshelves.