The process on how to bed a stock been cover many times. You might want to use the search button. There is this article which is where I based my process on: http://www.6mmbr.com/pillarbedding.html
It is very good.

To answer your questions, The shoe polish is your release agent and works together with the tape and playdoh (plumber putty is preferred by others) creating a very thin film that will allow you to remove the action from the stock and keep the bedding material from being pretty much mechanically bonded to your action. At the same time it is so thin that it does create a very close female mold of your action which is what you are looking for. You apply it to the action and buffer it. Tape is applied to another areas like the recoil lug. Playdoh or any other putty like material will cover orifices such as magazine wells, trigger group area and such.
Yes, you do have to make a hole large enough so the pillars can come in and out freely and the bedding material can flow. You might have to add a second "hand" of bedding material from the bottom of the stock for the pillars to be bedded properly. The holes in my boys stocks are little over 1/4 inch. I did my first bedding with a 3/8 hole because I was affraid to hit the reinforcement bar these stocks have. The holes were very tight for the jb weld to flow easily so I had to wait for the jb weld to be hard enough so I could rotate the stock and apply a second batch of jb weld and even as runny as it was it was a little more work than I wanted to do. Last boyd stock I did a 1/2 inch hole and that was a lot easier. I still had to do a second batch but it went a lot easier...

Read that article, it is really good and will give you a good idea on what are you after. Make sure you apply the release agent/tape/putty to all parts, not just what you think will get bedding compound in it.
Good luck.