1. what are the purpose of spacers?
To change the stance of the wheels, fill out the arches properly
2. do they make the car handle better or worst?
Make near to sod all difference unless you are tracking it, even they you prob wont notice
3. what's the best size to go for?
Depends on what wheels, but 20-25mm at a guess, see CS thread
4. does anything else need to be done when these are fitted? (alignment etc)
Shouldnt need doing unless your car is lowered. But might be worth a check when you next get tyres
5. does anyone have good pics to show the difference in stock and with spacers fitted?
See CS thread he PMd