I'd post this as a comment but it ended up being too long for that. I specifically want to address the salary part of your question because no one has yet explained it thoroughly. (I'll answer the other parts just to make this complete.)
Edit: Sources include my friend who was a recruiter, plus years of experience in IT contracting and dealing with dozens of recruiting companies.
How Recruiters Make Money
Recruiters typically get paid based on two different models (I'm sure I don't have the names right but you'll get the idea):
- Staff Augmentation
- Finder's Fee
For staff aug, what happens is they pay you for the duration of the contract but the client has no intention, at least initially, of hiring you permanently (they can opt to do that later, for a fee). In this case the recruiter will get a continuing commission of the difference between what the recruiter's company pays you and what they bill the client for your work. This is usually a standard rate, like they bill the client 30% more than they pay you, and the recruiter gets 30% of that difference. In this case the more they sell you for, the more they and you make, so you don't need to worry about them giving you a bad deal. All you need to worry about is whether or not the salary they offer is high enough in your eyes. If it's not, no problem, they'll just look for other opportunities to sell you for more (unless you're just asking way too much). Depending on their sales tactics they may try to convince you to bring your price down, but I usually walk away at that point because it's obvious they're in it for quick money.
The finder's fee model is for when a company is looking for a permanent employee. The recruiter's job is to match your skills and requested salary to the company's opening, and if they do and you are hired, they get a one-time cut that is usually based off your salary, so they are definitely keen on making that salary as high as possible while still being within the company's acceptable range. Once again a sleazy recruiter may try to get your price lower to get within the company's range (or to "do them a favor" which is even worse) but at that point I just advise walking away because they're not trustworthy.
Basically the moral of the story is that good recruiters will try to get you the highest salary possible for your skill set and experience because it makes them more money. Don't be afraid to talk to them about your current salary but definitely make sure to bring up how much you want to make as well so they know what clients to look at.
Regarding other applications/offers: This is primarily so they don't double-submit you to someone who may already have your resume. This makes them look bad, makes you look bad, and often will have you automatically added to a "black list" at the company so they'll never consider you for employment again, because it looks like you're trying to go behind someone's back to get a better deal and it wastes everyone's time. Always be honest about this and about what offers you're expecting/already have, especially because those offers can help you when negotiating salaries.
Regarding selling yourself: You want to be as straight-forward as possible with these people. Don't let them underestimate you, but don't embellish either, because you'll either look foolish if they call you out, or you'll end up in a job that's way over your head. They aren't necessarily technical people, but they know the industry lingo so what they want to hear are what technologies/languages you know and how proficient you are with them (examples are great).
Best of luck to you!