No! only script files that are part of the default SD list or other file extensions that are not in the default list that you would like to be intercepted. You only add those that you believe to be a potential threat.

It is no overhead at all, I rarely have it pop-up at all and even then it is for protection. You have to decide what you want protection or convenience/overhead.

I learnt how it worked simply by experience of using the program. If you click on a file that has an extension that is in the list, SD pops up (so it must be intercepting the windows file associations) and once you say it is ok to execute the script, etc. the program/script is executed/run as normal (so SD must be passing off the file to the original program that would have been called).