1)Yes, the album and photo's contained will show up in the iPhone as well as any other linked device.
2) Photo sync settings are disabled in iTunes once you have activated the iCloud photo library on your iPhone. Sync happens when you are connected to wifi (and maybe plugged in, i'm not sure on that one)
I use my iMac to manage all my albums and photos, all the connected devices update to my test iMac edit without any fuss.