Have you considered a change of username to "Confused of Australia"? Only kidding and we're always here to help whenever you have a problem.
Answers from last to first of your queries:
index.php in a directory can do many things...it can display an actual index page or it can simply prevent the users having direct access to the contents of the directory...putting an empty index.php file in a directory full of images that have access to them controlled by other files stops users from accessing that directory and either hotlinking to those files or downloading the lot for their own use.
.htaccess is a UNIX (so also Linux and BSD and other UNIX based/like operating system file. The following tutorial explains some of their many uses:
http://httpd.apache.org/docs/1.3/howto/htaccess.html To use smileys you have uploaded into the Smileys directory the general path should be forum root/Smileys/custom_smiley_directory/
Go to ACP>Smileys and Message Icons>Settings
Check "Enable smiley set selection by members" and "Enable customized smileys" and make sure that the paths shown there are correct.
Go to ACP>Smileys and Message Icons>Smiley Sets
Click on "New Smiley Set" and on the screen that opens add the custom smiley set name and its URL and check "Import smileys already in this directory"
If you are getting text but no smiley image go to ACP>Smileys and Message Icons>Edit Smileys
At the top of the main area showing the smileys details you can switch smiley sets...choose the problem one and modify the details of any problem smiley within it to associate text/code for the smiley with an image and put right any other problems/settings/issues with that smiley.
To add new smileys to a smiley set where there are some smiley images in the set that aren't shown in your forum go to ACP>Smileys and Message Icons>Add Smiley
My explanation is a bit long and tedious but it's really very easy to do the tasks involved in the use of smileys so don't be put off.