Yes, send a photocopy of your passport for now. The processing office will request the actual passport later on.
The best way to put everything together is to follow the document checklists. If you are applying outland, there will be three sections: the sponsor's forms and identity docs, the applicant's forms and identity docs, and the supporting documentation and evidences of the relationship.
I started with the applicant's checklist and sorted the papework according to how it was listed on that form, and then I used one of those large butterfly clips to hold that section together. I did the same with all the evidences - clipped them together with a large butterfly clip. Last I sorted the sponsor's paperwork according to the sponsor's checklist - and then included the applicant forms and evidences in the order that they are all listed in the sponsor's checklist. (You'll find the applicant's forms and such are re-iterated in the Sponsor's checklist). Then I bundled all 3 sections together, in the order of the checklist, with an elastic band and put it in the envelope. No staples, but I did group together (with smaller clips) batches of things - especially evidences like the pictures sheets, etc., that supported our relationship, before clipping that entire section together with the larger butterfly clip.
Hope this makes sense and is of some help.