You'll need to install a package and then map the button to it. Information is under the BTN_1 section. This is not a feature that is present by default on OpenWrt.
You'll build the image on a computer (ideally a linux box) and then copy the image file to the router. On the router, you'll run the sysupgrade command which will flash the device with the image you've copied over. Details here.
Honestly I don't know. There's no harm in trying it with the stock firmware on one side and OpenWrt on the other... if it doesn't work, you'd probably need to have both sides running the same firmware.
Guessing here... probably not. The LEDs are software controlled, and so you'd need to tell the PLC utils software to blink the LED. I could be wrong, though.
Why don't you run plctool manually to join the network? If that works, you can map it to the button. I have the predecessor of this device and I never mapped it to the button because I simply don't need it. You could even run plctool on your computer connected to the LAN port.
Going back to stock, what exactly didn't work with the web-based stock firmware converter? Did you get an error message from it or when trying to sysupgrade? Just saying "it doesn't work" is not really helpful.