A) Your initial assumption was wrong. As I recall when opening an empty library iTunes used to offer to scan either "My Music" or "Whole Computer"... It seems that is no longer the case and "Scan for Media" scans the whole computer. Use File > Add Folder to Library instead. The menu bar has been hidden by default but can be revealed with Alt (temporarily) or Ctrl+B (show/hide).
B) No, one time during the initial scan. Always a good idea to have your backup media offline when experimenting with new software.
C) File > Add Folder to Library adds a folder and all of its subfolders. You can also add media to iTunes by moving it into <Media Folder>\Automatically Add to iTunes. The media folder is normally <User's Music>\iTunes\iTunes Media.
Given where you are now the most effective way to get to where you want to be is probably to close iTunes and delete the following from inside <User's Music>\iTunes:
Album Artwork
iTunes Library.itl
iTunes Library Extras.itdb
iTunes Library Genius.itdb
iTunes Music Library.xml
sentinel (Hidden)
Then when you launch iTunes it will automatically create a new blank library for you to start over with.
Explore the options under Edit > Preferences > Advanced for Keep..., Copy... and the media folder location to make sure they are what you want before adding any media.
N.B. An iTunes library is easier to move around from one drive or computer to another if all the media that is connected to the library is stored inside the iTunes Media folder which is in turn inside the main iTunes library folder. With this in mind you may want to move your existing media inside the iTunes Media folder before adding to the library and/or move/create an iTunes library folder in a different location. If so see HT1589: iTunes: How to open an alternate iTunes Library file or create a new one.
You might find also iTunes Folder Watch a useful tool. This has the ability to create a number of watch folders which can, if needs be, also contain folders that are excluded within them.
You may, or may not, find my article on Grouping tracks into albums helps you to understand how iTunes organizes the media that is added to the library.
tt2