In order to install SFW into an MSCS environment, the cluster must already be configured and running, which is exactly as you have it set at this time, if I understand correctly. So to answer your individual questions:
1) The MSCS option installs a .DLL (vxresext.dll) that allows for SFW to communicate with MSCS and provide the ability for the cluster to utilize VMDG resources. It should be installed but is not required, as the use of VMDG resources is optional anyway; however the continued use of Basic Disks or Physical Disk resources are not contingent upon this option being installed.
Additionally, if you do not install this option, then all disks being utilized by the cluster should always remain in the Basic Disk Group within SFW and should not be placed in a Dynamic Disk Group, as the cluster would then need to make use of the VMDG resource in order to access those disks. And yes, the Quorum disk being upgraded to a Dynamic Disk is completely optional.
2) The MSCS option is not required; however, you can upgrade Basic Disks (with Primary or Extended Partitions) to Dynamic Disks within a Dynamic Disk Group (to be used as a VMDG resource within the MSCS cluster). The only real caveat being that if you upgrade Basic Disks with Partitions to a Dynamic Disk, and one of these disks contains the Operating System for that system, you will no longer be able to boot to the O/S on the disk after the upgrade. So you'll not want to upgrade your O/S partition to Dynamic, as a suggestion.
3) This is correct. If changing from Physical Disk to VMDG resources within an existing MSCS cluster, the Physical Disk resources should be removed from the cluster configuration and replaced by VMDG resources; however, again, the option is not required for MSCS within SFW unless you plan to implement Dynamic Disk Groups (VMDG resources) within the cluster now, or at a later time.
Technical Support Engineer