Been there, done that... I love the look. Hopefully you don't have a dog that would really scratch it up, also mature landscape outside so sand doesn't get tracked in b/c it can accelerate surface wear. Also high heels or a piece of gravel caught in lug soles can do a number antiqueing your floor. I don't have dogs or sand so the wear isn't bad at all.
Some of my house was done with oil base and some with water based urathane and both seem to hold up fine. If you use oil based try high gloss for first two coats because it is harder and finish with semi gloss or satin to taste. If you stain I strongly recommend Minwax wood conditioner first, according to directions on can.
1x10 width is ideal, any wider and it is more likely to cup. Usually it is put down over red rosin paper and face nailed into joists using cut nails in pairs. If you put three nails at the end of a board you run a higher risk of splits as the boards expand and contract. I have used air gun before using full head ring nails with a high enough air pressure to counter-sink the nails and no one can tell they aren't old fashioned nails and it sure was a lot faster, etc. You can use t&G or easier to use half-lap along long edges. Aclimate your wood inside your house for at least a week to minimize large shrinkage and subsequent gaps (which you will always get anyway). Gaps can also be minimized with central humidification. Leave 1/2" min. gap against all walls to protect against expansion. I recommend ordering really good #2 pine from your best area supplier and go take a look at their stock. Home centers' #2 usually is NO GOOD. I don't usually sand it, I just "ease" the corners of the edges with a small hand plane so they don't wear overly or splinter. Do NOT spot sand the floor as the swirls etc. will show through if you stain it. If you sand it at all, then sand the whole thing with a random orb sander. For complete refinishing you can use regular floor sanders and screen between coats to knock down raised grain. If you aren't going to stain it the sanding issue isn't as important. How level? I'm not sure exactly what you mean. How level should the subfloor be, pretty sound and level. If you mean how level does the finished product need to be, not incredibly - ease the edges and no-one will know if one board is 1/16 higher than the next.