One question per day, please. I'll answer the first...
The Things They Carried is fiction, non-fiction, myth, and memoir all in one. Mainly though, it is metafiction, or fiction about fiction. O'Brien chooses to break the fourth wall between storyteller and audience in order to show how the interplay between memory and imagination makes it difficult for the reader to distinguish the truth and fiction. Ironically, O'Brien says that story truth is truer than happening truth. And I agree.
O'Brien begs the questions: how can anyone tell the truth during war, when bullets are flying about and comrades are being blown to bits? Who can remember anything in such a panic? At age 19? And then, after the post-war traumatic syndrome and nightmares and flashbacks, who wants to? To whom do you tell these nightmares?
Too many people only believe what they think is true: facts, first-person witnesses, objectivity, overt realism. This is the literalist trap. Quite frankly, these readers fail to let their imaginations, or the storyteller's imagination, lead them to the truth.
What O'Brien means, I think, is that fiction allows more freedom to craft the best truth. The truth is not always the literal way an event happened; more often, the truth of a story is achieved over many years after the actual event happened, and the story is told, re-told, and revised, after which many of the original characters, plot points, and points-of-view have been altered.
Also, fiction will always be fiction when there's a 20 year gap between the event and the story's version. Quite frankly, O'Brien cannot remember in detail what exactly happened 20 years ago: the names, dates, chronology, and dialogue. He must have the freedom to re-create, re-name, amend, combine, delete, and select which memories make it to the final draft and which remain on the cutting floor. Journalists and non-fiction writers do not have such maneuverability, and their time gap is usually not so wide.
Non-fiction and journalism are limited by word counts, sources, citations, editors, and the like. But, a fiction writer is not hemmed in by limits: he can craft the best version of the truth over time by re-telling and revising. Not only that, but he has more language at his disposal, for fiction is an amalgam of all the others: poetry, journalism, myth, narrative, and history. It can have flashbacks and flash-forwards. O'Brien can be 20 in 1969, or he can be 40 in 1989 in the same story. Fiction is the greatest venue for O'Brien's metafiction because it provides him with the most tools for fitting together these multiple-POV stories into one novel.