A tiny tach wraps around the plug wire (another wire that is) and gets grounded to the block. I personally have had issues with false readings at idle with one but it was 10 years old and I think the new ones are better.
As far as props go, you need to figure out what load you are normally going to run, if you normally run light then a steeper prop will be ok until you put more weight in the boat, then you need to "regear" the boat with a lower pitch prop. A stainless prop is more efficient so with the same pitch you should gain mph but there are no guarantees. If it jumps on plane with a normal load you could probably go up an inch or two on pitch.
The only way to properly to set it up is with a tach and GPS. But if it seems to jump on plane and be revving out good the go up and see what happens.
Remember outboards don't have a transmission with gears so if your pulling a load you won't be able to swing an "overdrive" prop.
My 1232 with an 8 hp yamaha can hit 28 mph with the right prop and just me in the boat, but does about 16 with wife and kids, with a different prop of course, won't even think of planing with the speed prop. Just remember every boat and setup is different so good luck!
