1) Don't use title caps, it's annoying as hell. Use proper sentences, even someone who doesn't know anything about computers can do that.
2) It's not suggested, since you'll end up with horrible sounding game output and people complaining about not being able to hear you because the speakers are too loud.
3) If you chose to ignore the warnings, set the speakers as the system default output, and then go to the skype sound settings and pick the headset as your output and recording device.