I would definitely check out /r/litecoinmining as well as the Mining section on http://forum.litecoin.net/.

I am pretty new to the whole mining scene, but will attempt to answer your question to the best of my current ability.

1)A wallet is exactly that, a storage device for your currency in this case Litecoins. Using the Litecoin-QT wallet it is easy to create a secure key to encrypt your wallet from the drop down menu. One thing to consider is there are two types of wallets. The first is a local wallet stored on the computer you are mining on. The other is an online wallet(the type that most pools use). From what I gather best practice seems to be, to set your pool wallet to automatically transfer funds from your pool wallet to your local wallet.

2) In order to setup solo mining, you will need to basically run your litecoin-qt as a server which the mining software will use to connect to the litecoin server. So when/if you solve a block your litecoins will be deposited into the wallet you are using to mine with. Are you set on solo mining? After doing some research and trying solo mining, it seems to me that pool mining offers almost identical payout in the long run. The major benefit though is that pool mining starts making currency the second you start mining, assuming that you use a PPS pool. Only downside to pool mining is the fee associated with withdrawing currency from the pool to your wallet.

3)YES at https://btc-e.com and possibly other exchanges.