Normal cloth will do. You can paint it yourself if you want. Those muslin backdrops are usualoly for larger objects like human. Or you can shoot with a chromakey/green backdrop and add in the backdrop in post process later.
If you mean to have certain parts of the image blur and other parts in focus, you need to shoot at a large aperture (small f-number like f2.8) and a long focal length (a large mm, means 'zoom in' alot).
Clone tool and the Healing Brush will work. Alternatively, use curves/levels to increase the brightness of the shadow region and mask this adjustment layer to limit it to the shadow region.
Besides lesser noise at lower ISO, if I'm shooting at f1.2 in broad daylight, I'll want an ISO as low as possible (ISO50) so my photos will not be overexposed from too much light.
There are no average settings. But if you keep the shutterspeed fast enough to handhold (faster than 1/60s) and shoot at apertures smaller than f5.6 (meaning f-numbers larger than 5.6, like f8, f11) your shots will turn out decently sharp if you focused on it properly.
It depends on your shooting style. I will get a fast prime and a f2.8 zoom. Sometimes 85mm f1.2 and 16-35 f2.8. Other times 24mm f1.4 and 24-70 f2.8. 70-200mm f2.8 will be in my bag depending on the location i'm shooting in.