I would NOT use the poly bushing. I installed it thinking, hey, i'll never have to do this again, and I HATED IT. It makes your car vibrate like a bus. I went back to the rubber OEM mount.

That said, 1) yeah, just cut through the whole thing and scrape off the stuck on rubber with a knife - you don't have to get it ALL - just enough to get the new one in. They say to use a hacksaw, but I found a sturdy knife worked a lot better. 2) yes - there are alignment markings on it. the arrows point up. 3) I suppose you could oil around the edges or something to help slide it in, but really your best motivator is brute force.

This might help you - this is what I followed to do it:
http://www.matthewsvolvosite.com/2009/10/01/replace-upper-engine-mount-w-oem-bushing/

It's much easier the 2nd time around, once you figure out how to get it in place right - very frustrating the first time.

No, the entire original bushing, including the outer shell, must come out.

You can cut through the outer shell with a hacksaw, and then remove the outer shell.
You can press the outer shell out using any number of homemade contraptions made with threaded rod and washers, etc.
You can carefully tap the outer shell out.
Some people remove the entire engine endplate, with the bushing insitu and then deal with removing the bushing out of the car (seems to me like it is more work than it is worth).

As to orientation, did your kit come with any instructions? Your bushing kit may be different than another bushing kit, but one one I have is non-directional.

The original factory bushing has an arrow on it that is supposed to point to dimple on the engine endplate.