I'm not an expert on George or on doing ruler work with a sitdown machine. My answers are based on my limited experience on the George as well as my experiences playing around with non-ruler feet on home domestic sewing machine.
1. My George was also puchased as a used machine. When you refer to the older smaller edition hopping foot, I believe you are referencing the general purpose hopping foot that comes standard on all George machines. If you were very, very careful, you probably could do some ruler work with that foot, but I would strongly discourage you from even trying. I say that for 2 reasons:
-the general purpose hopping foot does not have a high collar. This means that you do not have a nice "wall" against which you can position your template and you need that nice "wall" so the template has a relaible brace as you are moving the quilt/template against the foot. I have heard people say that if you are very careful, you can get away without that high collar, but I learned the hard way that letting your focus drift for even a fraction of a second will give that template the opportunity to rise above the foot and your needle will hit that template dead on. Not only will this probably damage or destroy the template, but it will throw your timing out of whack. I did this with my Babylock Ellisimo when I didn't have a proper foot and it meant I didn't have my machine for 3 weeks while it was getting fixed and it cost me about $150 to get it fixed. These George machines are great machines but as owners, we need to take care of them. Part of taking care of them means not placing them in harms way and doing ruler work without a proper ruler foot will place your machine in harms way.
-the general purpose hopping foot also has a tapered edge to it, so not only is it lacking a high collar, but it's not even a flat surface. This would make it an even more unstable surface against which to brace a template/ruler.
APQS offers an add-on "ruler package" that includes an open toe free motion foot, a closed toe ruler foot, and an open toe ruler foot. I think I paid $200 for this package and it was well worth it. I use all 4 of these feet all the time, so they are all very handy to have on hand.
2. While the 3/8 in templates are nice, I don't belive they will protect you 100% from a needle/template collision. I would guess that about 95-98% of the rulers/templates available for long arm use are 1/4 inch thick and they work just fine. I don't think there is anything wrong with a 3/8 inch template, but I don't think it's necessary and I don't think it will completely protect you.
3. For me, the inside of the foot (where the shaft comes down and attaches to the collar of the foot) is a difficult place for me to hold the ruler. It's possible to do it, but I always rotate my quilt so it's in an orientation to avoid placing the template in that position. It is not at all hard to rotate your quilt to avoid that position because the George's harp space is so big, so this really is nothing to worry about.
4. You can continue to do SID quilting on your home machine using the feed dogs or you can do SID quilting on George. I do it on George now because it's a good way to get practice doing ruler work with a straight edge template. When I started doing ruler work, I thought I'd always want the longest template possible so I didn't have to keep moving my hands. It didn't work out that way! For one thing, it's easier to hold small to medium size rulers as opposed to the large rulers, and you will also need to move your hand positions more frequently doing ruler work because you're using them to apply a slight pressure against that ruler foot. As you're advancing the quilt, the angles you're applying pressure in will also change, so this will force you to stop and adust where your hands are holding/applying pressure on the template. For me, I am usually using a 6-10 inch long straight edge ruler for this kind of work.
5. You will develop your own preferences when it comes to rulers, so I can only tell you what helped me. I think the easiest rulers to learn on are the Fine Line rulers by Accents in Design. I say that because they all come with 2 handles and using those handles made it much easier for me to have a good "grip" on the ruler/quilt unit. I do not like the velcro strip on the bottom of their rulers so I removed the velcro and replaced it with Nexcare tape. To start out, I would recommend the Fine Line 8 inch straight ruler and the Fine Line 6 1/2 in and 10 in continuous curve rulers. Having 2 different curve rulers will allow you to create 2-sided arcs and that will make them much more interesting.
I hope you buy the used George; they are great machines!