Wow... sooo many questions. Ok, in order:
1. Yes, DSLua is in sync with Lua 5.
2. You need DOS for many things. Windows, no. DOS, yes. gfx2gba, as well as PACK.BAT, need DOS.
3. You can work with an M3 SD, or you could use a flashcart/passme combo, OR you could stick with an emulator. Most of my testing is done on Dualis 20.3. But I do have my new EZFlash III card with EZ3ME installed, and I have WifiMe (like PassMe, but uses wireless instead of a PassMe), so I can hardware test, too.

4. No, no, no and no. DSLua does NOT use the lid-close yet. Jpegs? No. Mp3s? Try again. C interface? HECK NO!
5. OMGPLZDONTDIEDSLUAPLZ
There

See ya,
daltonlaffs (glad 2 help)
EDIT 3 MINUTES LATER: EZF3ME, not EZ3ME. In case you want to google it. XD