1) You can try the plugin out at
demo.open-tools.net/
2) The plugin works by attaching a custom field to a product, where in the custom field section of the product you then select the media file (uploaded/generated in VM's media manager). So you won't have a separae Downloadable products area in the VM backend.
3) The plugin allows you to create "free downloads" (availabe to everyone), "registered downloads" (download only possible for users who are logged in) and "paid downloads" (available only to your buyers, also to those not logged in).
"Paid downloads" can also be bought by anonymous/unregistered users (i.e. users who don't have or create a user account at your site). The download link will be shown in the order confirmation after payment, and on the "Your downloads" section (see the documentation how to create that section) after entering the order number and password.
For registered users the download will also be (optionally) displayed directly on the product page.
You can find the full documentation at:
open-tools.net/documentation/downloads-f...-for-virtuemart.html
Best regards,
Reinhold