1.) How much noise should you hear from the bit inside the chisel when
you first power the machine up? I put in the chuck extension and I can
still only grab a small portion of the drill bit with the chuck and I'm
worried I might have runnout because of it, creating the noise inside the
chisel. It's not a loud noise but up to the point the bit hits the wood
there is a bit of screeching. When it contacts the wood that stops.

I have a delta and does the act same thing... It has gotten better over
time, however. Or maybe I'm just going deaf.

2.) How tight should the chisel fit into the bushing on the machine? I
had to use a block of wood and a hammer to get it on. I'll probably need
a
wood dowel and a hammer to get it off.

I use vice grips. It isn'y pretty.

4.) How much should I try to take off with subsequent holes? Is there
a
rule of thumb, such as half the width of the chisel or two thirds?

I do 2/3rds

5.) What are the most useful sizes of chisels? I started with the
1/2".
They had a lot of 5/16" in stock and some 1/4". I realize it depends what
type of woodworking you do, but I'd still like to know whats most popular.

1/2" is huge. I would not use that size except in softwoods. I think that is
at the outer limits of the machine's capability. The material removed
increases exponentially. a 1/2" chisel removes 4 times the material of the
1/4"

Definitely 1/4" for stuff like cabinet doors. I like 3/8" for hardwood
carcass joinery.

6.) What brands of chisel/bits do you recommend? I've read the
Austrian
bits are worth the extra money, but maybe only if you use them a lot.
Also, where do you recommend purchasing them?

I go to Lee valley, though I have not yet tried their new "premium" line. Do
get their sharpening cones and make sure that you lap the outsides of the
chisels.

Cheers,

Steve