What Operating System do you have on your iBook? 10.4, 10.5? What are the specs on your iBook? CPU speed and RAM?
To answer your questions:
1. What do you mean by the I/O Safety Box? I am running Logic 9. When I go to the Audio Preferences, I have the Core Audio Enabled ticked. I have my audio interface chosen in the Output and Input devices.
I have Universal Track Mode, 24-bit recording and software monitoring ticked. Process Buffer Range = medium, Rewire behavior = Playback Mode, Maximum Scrub = normal, Scrub Response = normal.
The I/O Buffer size depends what you are doing. You lower it when you are recording to reduce latency, and you higher it during the mixing process. If your buffer size is at 1024 and you are having overload messages it could be related to a few things. Do you have other applications open when you are running Logic? Try close them and only have Logic open. The iBook could be taking strain depending on what spec it is.
2. Its is fine to use either AIFF or WAV. I would say its only an issue if you are working with other people and you need to send them files and their applications can only use WAV. But other than that its fine. AIFF is Apple's standard audio format. And WAV is Windows standard audio format. But Logic can read both. Most other audio applications can read both as well.