Flac Mirror will first build a list of all FLAC files that don't have a corresponding MP3 file and only convert those. This means your existing MP3 files should be unaffected.
Re compression quality, it really depends on your quality standards and the equipment you play your MP3s on. I am fairly demanding, have some high end gear in my car so I use Extreme for MP3 compression. You should try compressing the same song with different settings, listen to it on your preferred setup and judge for yourself. Space can also be an issue, the higher the quality, the bigger the resulting MP3 files.
Incremental backup: you are correct. It only backs up files that have been added or have changed since the last backup.
After you add new CDs you need to run Flac Mirror again to convert them to MP3.
Copying to an external drive, assuming it is a standard USB drive, I suggest you hook it up to your laptop and drag and drop from there. Alternatively, you mount it to your Vortexbox and do the drag and drop that way. I suggest the first method since the second requires logging in and using the Linux command line.
Good luck!