Size.- I use the full size image, mainly because it gives me more pixels to work with when I crop the pictures later on in Photoshop. All other smaller sizes are useless if you also want to print your
pictures; in printing, you have to bring the image resolution from 72 (for your screen and internet) to 250 or better, 300 PPI. So a 640x480 original would become a tiny 2"x1" printed photograph, while the full 2048x1536 makes a wonderful 5"x7" at 300 PPI and, if very sharp, can even give you an excellent 6"x9" at 250 PPI.(By the way, NEVER use the 4x digital zoom; it simply reframes inside your original and makes the picture useless for printing).

Quality.- Forget about High and Basic; use Fine as a regular setting; the only time I switch to Normal is when I find myself in a situation where I want to take tons of photographs and my CF card is almost full. I switch to Normal to be able to take more pictures. With 2 64 MB cards, you can take 2x40=80 pictures in Fine mode, or 2x70=140 in Normal mode. Quality is good enough in Normal mode, but you should use it only if required if you consider the possibility to print some of your best shots. By the way, we took thousands of shots in a few months months! Don't hesitate to shoot; you simply trash everything that does not meet your criteria later on.

Autofocus.- With a telescope, I found that autofocus is the best choice. First I focus the scope, second I activate the autofocus of the camera and third, if the bird stays put after I have taken a few shots, I retouch the focus on the scope and shoot again. Going in manual focus is necessary only if the bird is not clearly isolated (like in a bush). Then you use the manual focus settings, but never at Infinity position because everything will be out of focus. As I wear eyeglasses and need assistance in focusing, I use the "Focus confirmation" option; it highlights the parts of the image in focus and helps a lot.

Sharpening.- As I do my electronic darkroom in Photoshop, I wait to be there to add the required sharpening. But I tried the "no sharpening" setting in the camera and was deceived by what I saw on the LCD monitor, even if I knew that I could correct everything in Photoshop.
So now I use the "Automatic" setting and am satisfied with it.

ISO Mode.- Don't use "Automatic"; put it in ISO 100 mode and leave it there; go to 200 or 400 only if there is not enough light to do a decent shot and if the shot is important. 90% of my shots taken at ISO 400 ended up in the trash can because they were too grainy, but I kept
some because they were rare birds; for instance my Caspian Tern was taken at ISO 400, 3x in the camera and 60x on the telescope, plus 50% cropping in Photoshop, for a total magnification factor of more than 200X, or a 10000 mm lens in 35 mm. At ISO 100, I would have had a 1/2
second exposure time...

Focusing choices.- I use "Spot metering" and do not move from there. I tried the other modes, but Spot seems to be the best, at least for me. 

Exposure setting.- "Aperture priority" is my basic setting. I always leave the camera in this manual mode. For a fast moving bird, I use this setting first to determine the approximate light available; than I move to full manual setting and apply the aperture previously determined by the camera in Aperture priority mode; this way, the picture is taken immediately when I depress the shutter; otherwise there is a slight lag where the bird can change position or move the head.

Exposure compensation.- Every time I use Aperture priority, I have to rely on the "exposure compensation" to help a shot where the bird is too dark, or too light. The access to this is easy, right on the top of the camera.

Contrast.- I had many pictures where the whites were too heavy; so I set the camera in "Contrast-" mode and leave it there forever.

Monitor.- I found that in reducing to the minimum the lightness of the monitor, my pictures were OK back on the computer; otherwise, many times they were too dark. So with this setting, and the Xtend-a-View LCD shade, I know that what I see on location is what I will have on
the computer at the end.

Scope.- Many people use Kowa line of products; I think that for scopes, "money talks"! Buy whatever you can afford, the higher the better. Try to have at least 70 mm optic; apochromatic is the best, but I could not afford it myself; ideal eyepiece is a 20x-60x zoom; it's useful to have a rubber shade at the end of the eyepiece, so that you can slip the lens of your CoolPix into it; I attached to my camera a 28-42 stepup ring that slips exactly into my 42 mm rubber piece, with enough resistance to hold the camera in place if I have something to do with both hands. So when you will have determined your scope of choice, take the measurement of the inside diameter of the eyepiece and order (for instance at KCK Power) a ring of this dimension; they have almost
every combination: 28-39, 28-42, etc. Some people built an attachment to fix the camera to the scope, but I still think that it is a better idea to simply slip it into place than to fix it permanently.

The Xtend-a-View LCD shade is a must; but in order to avoid attaching it to the camera with velcro bands, I bought it bundled with the "Wing" attachment system from OpticZooms. Now my CoolPix looks more like a 6cmX6cm Hasselblad, but I can move my Xtend-a-view much more easily with it.