1-2) Add the following code at line 1 of you page to increase the server memory limit and execution time settings:
<?php
ini_set('memory_limit', '256M');
ini_set('max_execution_time', 120);
?>
3) See the "Customizing Digital File Pro Error Messages" tutorial in the How to section of the DFP support page:
digital-file-pro/
4) When the upload is set to Web Images only, the re size options include Fit to Height, fit to width or fit to box. These options do not use the fill color and will set the image to dimensions you specify.