Yes to all the questions

This is why you need to learn to fly
172 first then move up to bigguns

X

The rudder is a very important piece of the aircraft.  That is what keeps the aircraft coordinated during flight.  The only time you will be in uncoordinated flight is when you put the aircraft into a slip for landing, certain aerobatics, etc.  That is why FS gives you the option of automatic rudder or manual.  Manual means you have to control the rudder to keep the ball in the center (turn coordinator).

Do I have to turn auto-coordination off to effectively use the rudder?

As a matter of interest this will depend on the type of aircraft. With most light & GA aircraft the rudder is used for co-ordinated turns, what we used to call rated turns. Bank to the desired angle & use the rudder to centre the bubble. Jets & high-performance aerobatic aircraft (like the Extra 300) are quite different. Turns & all normal control inputs are usually made with aileron & elevator alone. To turn, bank to the desired angle, then ease back on the stick to start & control how steep it is. In flight, the rudder is only used for advanced manoeuvres & aerobatics. Also for crosswind landings (sideslips) & ground handling on some types.