Currently, there's not much reason to use passive instead of active. Just makes it that much easier for the target to escape, especially submarines. Of course, passive wouldn't give the target an active intercept alert, but the only ones who would get it anyway are submarines, and they'll normally hear the torp long before it activates.
Slowing the torpedo down to a crawl...I was fooling around in an Akula the other day, had a Typhoon nearby. I set the UGST for 15 knots (don't remember why), active, and let it rip. Well, the Typhoon captain wasn't exactly phased, and continued on his assigned barrier patrol at 15 knots. After a hilariously slow pursuit, the torp finally caught up to him in a turn. Moral of the story (at least for LWAMI): Set your torps at a reasonable speed!
As for what CMs to use, if you're fighting AI, just drop active. They don't use passive seeking torpedoes, and even if they did, all you'd really have to do is drop a noisemaker and go all stop.
You can tell the torp has acquired when it stops running its search pattern and starts moving in a straight line. Not always the best idea to cut the wire though, unless you're damn sure the torp is homing on the correct target.
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