I wouldn't have the first hit wake him up until the end of the round; we're talking about six seconds here.
Edit:
...and the RAW never explicitly says when you wake up, so the situation must rely on common sense.
b is correct. It means that a Heroic character gets to use one item power per day, plus he can use an additional item power each time he hits a milestone.
A Paragon gets two free uses, and an Epic character gets three free uses.
The Paladin has less power selections, but he also has the benefit of having two very different, viable builds; a Paladin can easily go all Cha and dump STR. The Wizard, on the other hand, is always maxing Int.
I've built three characters with these books and each time I've been annoyed with the limited feat selection. My new plan is to allow my players to go ahead and take Paragon feats.
Good idea? Bad idea?