A1: Yes, that's why it says that in the interface.
A2: always use "Backup - all files" with "Smart Update" for both drives (since you're starting out with empty drives anyway, there's no reason to use erase-then-copy the first time). Do not use "Backup - user files". "Backup - user files" backs up your Home folder(s). Your Artwork drive does not have home folders.
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--Dave Nanian
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