Hi James,
ad 1)
let's assume you trade pair AAA/BBB...to open a long pair position, you buy AAA and short BBB...to open a short pair position, you short AAA and buy BBB
ad 2) there are two Z-scores (ask and bid) because in reality you observe two different price for each stock (bid price and ask price)...so the ask z-score is calculated from ask price of stock 1 and bid price of stock 2 and vice versa