Note that because the comments below are about legal terms and conditions you should seek out your own legal advice to ensure that you are acting in compliance with the AWS Service Terms. My comments below are general and my understanding only.
With that said:
In general, you can do whatever you like with AWS services as long as you are not breaking any laws (again, independent legal advice strongly recommended) and you are acting within the AWS Service Terms.
However, cryptocurrency mining is not allowed when using the free tier of AWS services - you may be charged for usage in that case. This is explicitly called out in the AWS Free Tier Terms:
You may not use AWS Services under any Offers to mine for cryptocurrency. If you use AWS Services under an Offer to mine for cryptocurrency, we may charge you standard rates for your use of the AWS Services, and we may suspend your right to access or use any portion or all of the Service Offerings.
And repeating: I am not a lawyer and you should seek independent legal advice.
To answer question (4): You should test your code on various instance types to determine what is best for you.
