I use Adobe's Premiere Elements http://amzn.to/1626iCm to put the final video on DVD. The built in mic isn't the greatest but it does have an external mic adapter so I use the ATR-3350 lavalier mic http://amzn.to/XCQ9P0. Should work great for you.
Depends entirely on how you are using it. The built in mike is not good and tends to pick up a lot of background noise and if you are outside lots of wind noise. If you are in situation without these two elements then you should be okay but don't expect great sound.
If you use an external mike then the sound quality can be as good as the mike is.
In typical environments the internal mic is fine. If you are in noisy environments then obviously not as good. There are a number of available external microphones that will improve the audio performance if this is a concern. In general applications I have found the internal mic to be sufficient. Performance can also be improved by adjusting the microphone's input volume.
Update: It's no wonder the Kodak company is in trouble. Even though the camera had very little and light use it broke rather quickly but of course after the warranty. It charges and functions normally but it will not hold a charge. If I charge it and use it immediately it's fine. But if I charge it and let it sit it's dead when I attempt to turn it on. Kodak Customer Support tells me it has a bad "board" and that the repair would cost as much as I paid for the camera. I knew I should have bought a Flip instead.