well first off... WELCOME TO THE WORLD OF SMART PHONES!!!
now to answer your questions,
1. CM7 or MIUI??? Is one better? Pros and cons? How to pick which one to use?
well they are both great!
the best way to figure that out is to flash one, run it for a couple days. then flash the other and do the same.... also, dont forget about the few froyo roms we got around here too.
2. When you mention backing up the original recovery.img file found on my phone "just in case" ... what is that file for and in what circumstance would I need to use that backup?
well that file is your phones recovery (where you flash roms and such)... you should back it up, but if you dont there is a a copy floating around here just in case.
3. Making the Nandroid backup... where does the backup file appear and what is it called? Do I leave a copy of it on the SD card and also save a copy on my computer? Or just have it on my computer and erase it off the SD card?]
the backup file appears in "/clockworkmod/backups". when you make a backup, leave it in that folder or clockwork mod wont find it. also, when i make backups i always transfer a copy to my computer just in case my sdcard goes bad or something. but i never delete them off of my sdcard unless im updating the backup
4. I bought this phone used. The previous owner did a factory reset on it, but I still found some pieces of apps leftover on the sd card... as I flash the new ROM, I would like to know that I'm starting out totally clean... is there anything that should not be deleted from the sd card, or can I wipe it clean/reformat it?
you can completely wipe the sdcard... the phone will remake all of the files it needs. so no worries there
5. When flashing a new ROM or restoring a Nandroid backup, are installed apps and data lost? Does the android market recognize me when I access it with a new ROM and allow me to reinstall apps I've already paid for?
if you flash a rom that requires you to format /system and do a factory reset, yes everything is gone. and when you restore a nandroid it will take you back to whatever you had on your phone at that time... when you access the market on the new rom you will have to re-ad your google account to the android market. and you
will be able to get all the apps you already paid for back. the android market bases all you puchases on your google account. so you could switch to a completely different phone and still get all your apps back for free.
if you have anymore questions let us know. we will be glad to help you more
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