The name of the item that you send to PayPal is contained in the name element. The id value that you are using is the itemID that is set in the add to cart server behavior. The SKU is just another column in your cart, using it for the item number is appropriate. If it is working for you like this then it seems that you have it setup correctly.
For the options you would use the on0 and os0 for the first option name and option selection (value), then on1 and os1 for the second option name and value. Each item can have multiple options and values for it. So if you would like to show an item as having a particular size it might look like this:
php:
<input type="hidden" name="on0_<?php echo $winkee_Index+1; ?>" id="on0_<?php echo $winkee_Index+1; ?>" value="Size" />
<input type="hidden" name="os0_<?php echo $winkee_Index+1; ?>" id="os0_<?php echo $winkee_Index+1; ?>" value="<your size column from the cart>" />
You would bind the size column from your cart to the os0 value.
