There is always room for better documentation! 
1 How to control spindle speed?
There are no overrides. The RPM is set in the tools database. I don’t like this either. I wouldn’t mind if the tools database value was entered, but show it to me and let me change it.
2 When is it best to use parallel path and when should conventional or climb milling be used?
This is more advanced knowledge of machining. It depends a great deal on what you’re doing and stock. Climb milling is often the correct answer (despite the “conventional”).
Here is a great article that should help:
Have you seen this?
http://www.grzsoftware.com/manual/toolpath_settings.htm
Look at the pictures and shapes and I think your questions will be answered; we can help with what’s left. Depending on the shape one is milling, one chooses to obtain the nicest finish and tightest cutting (since these are approximations).
3 What does “enable arc fitting” do?
If MeshCAM can find a circle, it will use G02/G03 - the CNC machine does the circle as one or two arc commands. Otherwise, MeshCAM emits a great many G01 (linear cut) commands to approximate the circle. If it can use it, the G code file is much smaller (if there a lot of circles).
4 Waterline and Pencil are ambiguous terms. I get some idea about how they work from seeing the simulation but are there any good tutorials on how to use these settings most effectively?
These are the traditional names for the techniques. Waterline comes from what the side looks like when you’re done - think of an evaporating reservoir. Pencil is drawing around the object with a pencil… just like how one would make an outline on a piece of paper.
Pencil is used to clean up edges that were waterlined (which is necessary since the bite of the end mill cannot go all the way through a stock). One pass around using the full length of the flutes reduces or removes all signs of the waterline.
Also, if you bought a Nomad then you have the ability to make lithopanes from black and white picture images. You don’t find anything in the menus that indicate this. You find out only if you are curious and decide to try to load a .bmp or other picture file format. This is an awesome feature and it should have a dedicated GUI button, IMO.
This may help:
http://www.grzforum.com/viewtopic.php?f=4&t=446
Lithophanes are done in MeshCAM via a technique, not a specific button. Have you visited the MeshCAM site and seen how they describe all of the features?
Do see a tutorial on lithophanes in the forum:
Many of us have gone with CandleStone rather than Corian as the results are nicer. YMMV.
http://candlestonegifts.com/candlestone-material-for-lithophanes
mark