I searched the forums and did not find what I was looking for, so here goes:
(1) I'm running Studio Projects C4 mics. Should I select Hi-z or Lo-z?
Hi-Z/Low-Z is only for the 1/4" front input, so the switch setting is ignored when using XLR's
(2) I read somewhere that the monitor sw feature can affect the quality of recording. Is that so? Should it be left off?
I haven't heard that one... I know the monitor sw can affect the headphone & RCA outs, maybe thats what you saw? If you're not using either then you can leave the switch off & save a little battery power.
(3) Is there any way to improve levels of headphone monitor? Not very good when the music around you is loud.
Yep, get a Beachtek SVU-2 and get not only a very good headphone amp but stereo meters! Check out the DIY Meeters thread (search for SVU-1, Beachtek, SVU-2 and you'll eventually find it) and team SVU-x for more info. This will require the monitor sw to be on... at least thats how I run mine.