Is this a spousal sponsorship application for PR? If so choose yes and include a letter of explanation with the application. If unsure thats the best thing to do. Then you can't be accused of misrepresentation if you didn't answer correctly.
This is a Family class sponsorship section. Not a student section. BTW you committed misrepresentation by not disclosing the US Visa rejection, and you will likely not be able to overcome that!
1. What terrible advice! You have not right of appeal when you lodge inland. Also living apart I would file outland. Many people file outland while in Canada.
2. You don't need to waste $5000+ on a representative unless you have a complicated case!