1) Yes, the game can look awesome. I don't have the best PC, but the game looks pretty good on it. I don't have any mods installed to make it look better, but there are a bunch in the downloads section. The link is right next to the User CP at the top of the page.
3) The main mod that almost everyone here uses is the Grey Wolves Expansion 3.0. Improves gameplay, more realisim, more fun, cool stuff like that.
Awesome mod, this is a must have if you want to get the most out of SH3. I also use the ACM-GUI Reloaded - hsie's Edition V1.15 GUI mod. Awesome if you want an OLC GUI look, but not the drain on your system as that mod uses the 16km atmosphere mod from GWX.
4) Yes, you can make custom emblems for your u-boat. I changed the Laughing Swordfish emblem from black to red, (that's mine, don't use it
) but there are others that you can download too. I know that in the downloads section there are two versions of the Laughing Swordfish, a black one and a green one. All you need to edit one would be a program like paint, PhotoFiltre, or Photoshop. I think that you have to save it as a TGA file though. Not sure on that.