I personally would never advise someone to go with a fish cycle. While this can be a good method, in the long run it's a pain. Damsels are usually used from them being cheap, and resistant to most common deseases in the fish world. In the long run, you will likely be spending hours at a time trying to net the little devils out of the rocks!!
To answer your questions (in order):
1. You should remove the shrimp after a period of around 3 days. This works best for me. I would try to get as much shrimp out of the tank as you can,
2. You should put the rocks in before you add any type of fish. I wouldn't advice the fish full cycle as stated above, but using the fish method seems to be the most affective way for cycling.
3. I would wait until the tank is fully cycled before you add any fish, this would be around 2 months of waiting for your levels to stable, and tank to mature a bit.
I would start out with more hardy, less agresive fish such as clown fish for being your first fish, then as the tank matures you can move into more agresive less hardy fish, such as tangs (if your tank is large enough, a 75 gallon minimum is recommended).
Happy reefing!
PH =)