When my three kids did it last year there was an afternoon "pirate parade" (around 4:00 or 4:30), so you may want to keep that in mind when picking a time. If you do the PL early you would have to head back over to that area if your kids want to participate.
You pay there. We used our Disney Visa rewards points.
I do believe they take a CC number over the phone, but they don't charge anything to it unless you don't show up.
The mermaid package wasn't offered when we went. Younger DD did the Empress and older DD did one of the "boy" pirate looks with a scar.
It was a fun experience. My kids (DD11, DD6, DS4 at the time) all loved the experience and continued to wear parts of the outfits for the remaining several days of our trip. They recently mentioned they would like to do it again, but I'm not sure how much their makeup will "melt" in August.