1. Better in the way that C++ is more powerful, and can do more than LUA can. By powerful, I mean faster, and probably more image and sound formats.
2. Yes.
Download LUAPlayer for the PSP (whatever version you want)
Inside the "luaplayer" folder, delete everything in it expect the "System folder". (So delete applications folder, and whatever else is in there.)
Put the file that you want to be ran in the luaplayer folder, and rename "index.lua". (Assuming it isn't already named that.)
Now use it like normal homebrew.
3. I don't know.
4. Yes you can load Mp3 files in LUA using the version of luaplayer:
Lua Player mod 4You will find the mp3 functions on the page, and the downloads at the bottom.