Hi andante,
Q1) I did it the same way when I started the course. After having worked myself through level 3 I decided to draw a grid chart for the room. But I started like you.
Q2) I would only include the balcony if it's used as a part of the living room.
Q3) If you look at the element cycles you'll see that earth blocks water but not the other way around.
Q4) I would not worry about that. In general space feng shui, East and Southeast belong to the wood element and are both enhanced by water. I seems to me that both directions could benefit from the water placement.
Q5) I can't think of any implications right now. Security first.
Q6) Just enhance the areas with the appropriate elements and/or symbols.
Love,
Astrid