I just typed up a giant post, and you had already solved it! Next time could you edit the post and put (Solved) in the title!
1. You will just need to use
THIS GUIDE to make the memory stick (and battery). After that, I think it should work ok. I would just use that whole guide and use your original battery for it. You can convert the battery back with no problems if you follow the guide correctly. After making the set, just insert the magic memory stick and then the battery (into the slim or any other non-hacked psp). A screen should come up, and I'm sure you can handle it from there. You now have another Custom Firmware PSP!
2. Yes you were correct about slims not being able to use 1.5. Thats why you should follow the guide above. I would not suggest using the tool battery. Basically I answered those ?'s above haha.