I think that the goodness of M&M cannot be adequately stressed. That said, your questions are not merely about the goodness of M&M...
It is amazingly versatile, at least as far as what I've done with it. What I'd say is that it's best for a supers game, but if you wanted to play a fantasy game or even a super-spies game, you could do it nicely -- the wizard's fireballs can be replicated with super-powers, and the fighter's amazing combat prowess can turn him into a veritable Conan. You won't have the same feel as a D&D (or Conan) game, though -- working with powers and damage saves, you'll have something that feels a bit more comic-book-y. Non-magical heroes will be more over-the-top in terms of what they can do, if you let them -- like letting the barbarian hero get super-strength or the rogue hero get spider-man-like dexterity. That
might be the flavor you want -- I really enjoyed it when I ran a fantasy game with M&M rules -- but it also might not work for you or for your players.
But I wouldn't start out trying to do super-spies or fantasy. I'd start out trying to do what it was designed to do -- a super-hero game -- and work your way out from there.
If you get it, get the 2nd Edition. That fixes a lot of issues that were present in the first edition (not major issues, but issues nonetheless). Also, that's the version that's current and supported, so you'll get more value out of any other purchases you make.
Haven't seen the other two books, so I can't say which is better. I did, however, enjoy M&M immensely. I just wish I could convince people where I'm living now to play...