Yup - it needs to be size 12 (though I guess it could be larger if you want but I can't imagine why you'd do that!) because they shrink the forms down I believe, so anything smaller than size 12 can't be read clearly. And I think they recommend Times New Roman as the font - again I'd go with that because it's pretty compact but not unclear.
Ah right. Well that probably depends on the font that you intend to use. I'm not sure if it's absolutely compulsory that it must be in TNR (check the UCAS website maybe) but I guess it's not cos they're going to get some handwritten forms anyway... You'll need to be very careful with the font you choose if it's not TNR because, like using a smaller font, it may not be readable once it has been shrunk down. I can't think of many that are more compact than TNR anyway - did you have one in mind?