I'm sure other with more experience will chime in but my answers would be:
Yes a butt is what you want. I don't believe it has to be bone-in, but the ones I have done have had a bone. I like the butt more than the picnic but I've done both and the results have both been good.
Are you starting it with the idea you will have it done and finished well before the party starts...or have it timed so it will be fresh off the drum?
If it will be done cooking within 4-6 hours of eating then rest then pull. It will stay warm in the cooler for quite a while . Obviously if it's going to be longer than that before people show up to eat then I would rest, pull, refrigerate and reheat. If I have to do the later I usually put the meat in the crock pot on "keep warm" with a little apple juice or something. Not as good as fresh but still has a good taste.
I inject mine either with apple juice and some various spices or with a Dr. Pepper mixture and I like the results...others may have a different opinion.
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