For Q1 your second version is correct. If your master's or henchmen's card specifies a cache for e.g. 3SS then that's the starting number of SS he or she gets before choosing to add more up to a max of 7SS. The starting cache is essentially a balance thing, masters/henchmen with higher starting caches are supposed to be less potent than those with lower ones.
For SS use they are declared prior to flipping and depending on if it's used for attack adds a or defence add a and a to their damage flip. The adding of the extra card was a rule in V1.5
Hope that helps clear it up.