Yes, yellow on yellow, blue on blue.

Grits: if the stone has chips or cupping, start with something coarse, say 400 or so, until you get it flat. If it's pretty close to flat to begin with, I'd say just start and stay with 1000 grit. That's plenty fine enough to finish with as well, though some guys like to go higher.

Use pencil grids on the stone's surface to know that you've got it flat. Draw a pencil grid, lap til it's disappeared, then draw another and hopefully it will disappear quickly.

Round the edges and corners after you've flattened the surface. You can do this by holding the stone in one hand and making sweeping movements to sand the edge; if you vary the angle of the edge being sanded you'll round it (instead of creating a flat bevel). A rounded edge is better than a beveled one in my opinion; more forgiving. Do this with each edge. As for the corners, that's simple enough; just use common sense. One swipe on each corner is usually enough.

The point of all this is simply to have a flat honing surface with no sharp edges that you could chip a razor on if your stroke got a little sloppy.

I don't know what you mean exactly by "lap the slurry," but no, you don't do that. Slurry is just the milky abrasive substance that the stone yields when you're lapping it or honing on it.