Hey,
1) WordPress center crops all images which are bigger than the slider images. You can upload right sized images if you want to avoid cropped images (or if you'd like tocrop the images manually) - the slider images are 700 x 320px.
2) The slider can't do this out of the box. However you can try to modify index.php - replace following line:
$additional_loop = new WP_Query("cat=".$k_option['mainpage']['feature_cats_final']."&posts_per_page=".$k_option['mainpage']['feature_count']);
with:
$additional_loop = new WP_Query("cat=".$k_option['mainpage']['feature_cats_final']);
and:
while ($additional_loop->have_posts()) : $additional_loop->the_post();
with:
while ($additional_loop->have_posts()) : $additional_loop->the_post();
if( $loopcount > intval($k_option['mainpage']['feature_count']) ) { break; }
and:
$preview_image = kriesi_post_thumb($post->ID, array('size'=> array($kimg['shortcut'],$kimg['overwrite']),
'display_link' => array('none'),
'wh' => $k_option['custom']['imgSize'][$kimg['shortcut']]
));
with:
$preview_image = kriesi_post_thumb($post->ID, array('size'=> array($kimg['shortcut'],$kimg['overwrite']),
'display_link' => array('none'),
'wh' => $k_option['custom']['imgSize'][$kimg['shortcut']]
));
if (empty($preview_image)) { endwhile; }
Create a new thread and tell me what problems you are encountering and what you want to know. 
There is no step 3 :) 
