I assume you're referring to the GD library that can be installed with PHP.
First off, I'd need to know what O/S your webserver is running on. To install it on Windows is easy - simply uncomment the "extension=php_gd2.dll" line in the php.ini . If you're installing on Unix, I can't remember the exact switch to add, probably something like --with-gd=/path/to/gd/lib once you install the GD library. At any rate, any installation questions such as that would definitely be answered by the fine people watching over the 'Install' forum.
As to your second question, I can't say for sure. I haven't delved deeply into GD, but I do know that the PHP.net manual is very descriptive. Coupled with the user comments, it is a very powerful and comprehensible tool. I suppose it all depends on just how complicated you want to make it! 😉
For your last question, I can't give you a good answer, only an opinion: Don't make them install any more software/plugins/etc than the have to. Using the GD library would seem the best solution, to me, for scalability reasons. If you don't have to make your users depend on one more piece of 3rd-party software, chances are you shouldn't.