Yes, it looks like you'll need to upgrade to the latest version of iPhoto for $15.
Will iCloud eat up my data plan? Or will it only use Wi-Fi?
iCloud seems to be intentionally focused on Wi-Fi syncing. Backups won't happen unless you're on Wi-Fi and plugged in, for example. But some features will sync over cellular connections, and yes, they will use your data plan. Users on limited data plans will need to consider their iCloud strategy carefully.
Most of my music is on a non-iOS iPod. How does the iPod fit into the scheme of songs being pushed to all devices?
iCloud requires an Internet connection to do its job, which explains why it's limited to iOS devices--which can connect to Wi-Fi networks and, in most cases, 3G data networks as well. We can't see how an iPod nano or classic could ever fit into the iCloud ecosystem.
What will this cost?
Almost all of the iCloud services are free. The only thing you have to pay for is iTunes Match, which will cost $25 per year.
When will iCloud be up and running?
Right now, the iTunes in the Cloud feature is available for users in the U.S. only. (Apple's calling it a beta, so you can expect some wonkiness.) The rest of the services are expected to roll out with iOS 5 in the fall.
Will it work with all iOS devices and Macs?
In order to use iCloud, you'll need iOS 5, which will run on the iPhone 3GS, iPhone 4, third- and fourth-generation iPod touch, original iPad, and iPad 2. On the Mac, you'll need to be running Lion and iTunes 10.3 or later. For PCs, you'll need Windows Vista or Windows 7.
You will be able to convert your MobileMe account into an iCloud account when the new service launches. Apple's MobileMe transition document says "When iCloud becomes available this fall, more details and instructions will be provided on how to make the move." Existing MobileMe services will continue to work until June 30, 2012.
Do I get a refund?
If you've recently purchased a boxed update and haven't used the code yet, or have an unused code in your account, you may be eligible for a refund. Apple has posted a support doc detailing how the process works. You can also request a pro-rated refund for the remaining portion of your subscription. For everyone else, Apple has extended your MobileMe subscription until June 30, 2012. After that date, MobileMe dies.