1. I haven't used Octopus, but you shouldn't need both.

2. Like Bot said, if you have keys on your blacklist, you won't be able to type them to your slave from your main, including on the login screen. In Keyclone, you can set a key to toggle "Do-not-pass". Setup > Override Settings > Override Do-not-pass. Set that to something and turn it on and off when you need to. Also, make sure the key you assign doesn't type anything...I had mine set to numpad decimal and it would type a . in some password fields when I toggled my DNP, so I'd have to clear it before entering my password.

3. I think we'll need more information...exactly what issue are you getting from 2 wow folders? Just the one with Octopus? I don't think Octopus is maintained anymore, you could try posting about Octopus specifically in the Software forum, I'm sure there's a number of people with experience with it.