A: 

EDIT: Added answer for first question.

First question: Add the pagerClick option to the cycle function.

pagerClick:function(zeroBasedSlideIndex, slideElement) {$(slideElement).find('div.cover').hide();}

The second question seems easy: based on the plugin doc:

Assuming you have a play/pause btn

btnPlayPause.toggle(function(){$("#slideshow").cycle('pause');},function(){$("#slideshow.cycle('resume');})

you can also change the play/pause button image in those functions. Also look here

krishna
this pretty much did the trick, I used the pause code you gave on page load. The .cover hide worked as well but now they are showing on each transition (after each fade out). How do I hide a div after 500ms (aka let div fade out then hide it)?
Wes
I noticed a typo in your playpause code. resume is mis spelled.
krishna