1) Change the filename extension to .xml
When I was developing the Clandemonium XML, I had a giant notepad document and when I wanted to save it, I'd type "clandemonium.xml" in the save name. If I just put "clandemonium", it would save it as "clandemonium.txt".
I assume the process on your OS is similar. These files don't seem to take up much space, either.
2) Go look at the Antarctica XML file: http://www.conquerclub.com/maps/Antarctica.xml
Right near the top of the document it has a whole section on <positions>, which outlines the maximum number of the listed positions a player can start with.
Moreover, if you go play King's Court in a 1 vs 1 game, you'll only start with 2 castles, despite there being 8 castles available. That's because the XML says <positions max="2">.
If you have 8 start positions and you put <positions max="4">, then play an 8-player game, each player will start with 1 position, simply enough.
However, you'll want to make sure all of your non-starting regions has a neutral tag in it as so:
That way it won't be given to any player in the drop.
3) See 4).
<- chipv's XML Wizard is what you want. Assuming the solution for 1) worked out alright, you can plug the XML and images into the software and work out the coordinates as you go along. I don't know how to explain the Wizard any better than that, but you can ask questions all over the place (even in this thread
I hope that answered your questions properly. If in doubt, ask away or check the XML of some existing maps which you know have the features you want: http://www.conquerclub.com/maps/