Everyone has pretty well nailed most of your questions. On the subject of channel volume versus master volume, the channel volume affects how much gain is occuring in the preamp section. If you're a rock/metal player like me, you probably want your tone as powerful and saturated as possible, so you'll dime the volume on the channel, and then just bring up the master volume to the actual perceived decibel level you are looking for.
This actually segues into the topic of tube screamers and the like. The purpose of boosters/drivers like these isn't to make your distortion (though some do for blues/jazz etc), but rather to further push your preamp stage and give your gain that extra kick. I think they're a good idea if you have a good metal amp and want to try to make it sound like a great metal amp. But if you plug one into a Marshall JTM45, you're not going to be playing Iced Earth on it.
On a related note, see the thread I started yesterday about just this topic.
http://bareknucklepickups.co.uk/forum/index.php?topic=14336.0Anyway, on the subject of the pedals that are distortion in a box, I think they can be cool if you're an entry level to middleweight player who wants to get a fairly good tone without dropping 2000 pounds on a high power touring rig.
I've owned or toured with most of the tube metal amps, and I've also rebuilt my live rack more times than I care to think about. And I've owned all kinds of solid state gear, mostly preamps and effects. My feeling is that a solid state distortion (BOSS GT6, GT8, GT-PRO etc) can sound good, but you really need to have it running into the effects return on a tube amp to warm it up and give it just a bit of tube power to make it sound "real." I've gigged with guys who have jacked PODs directly into PA systems and it sounds digital as all hell. It sounds cool when you're recording, but you try it live and it just doesn't push air the same way.
I prefer a tube preamp, one that reacts naturally to my high gain passive pickups, but I can do a solid state pre/distortion box. It just needs to get powered by a tube poweramp or a tube head. At LEAST a mosfet power amp, like a Mosvalve etc. You go straight solid state and it just hurts your ears. I was in love with my Vetta II head for a long time, but it never quite gave me the gutsy tone that I wanted. Line6 now has a rack version of the POD X3 system. I'd like to try that through a Mesa 20/20 or something, I bet it would give you a heavy and versatile system without a lot of compromise. Or the Fractal Audio Axe-FX. I consider that the holy grail of solid state preamplification.
OK, I've been typing long enough, time to go stretch my fingers around a les paul neck.