I just recently checked into this as I need to replace the radiator on my 300TE. I can't remember from what sources I received my information, but I came to the following conclusions:
1. 50/50 (or in that close vacinity) is proper. Antifreeze helps water do its job heating and then cooling the engine. In addition, it helps by preventing water from freezing and has an additional wetting effect which helps to prevent and remove air bubbles from resting (and thus aids slightly in lubricating). Ultimatley, though, water is what does the work.
2. Regular antifreeze will work at about $6.00 a gallon. Orange will add some additional protection because of the ph issue and, from your dealer, probably runs $10.00 a gallon. I'd spring for the orange.
3. While regular water will frequently be fine, distilled guarantees it will be fine (no particulate matter or other impurities). Around here, with high iron/sulfur well water, I'd never put tap water in my tank. Like the orange/green/yellow antifreeze issue, the difference in cost is so minimal, why not get all the benefits available?