Hi Hun, I'll do my best to answer but I've never used flat terries myself!
Folding-Think it's easy enough, just a matter of practise. If you have a look here http://www.kittykins.co.uk/advice/id/20 it shows you the different folds and how to do them
Size-I think that standard terries are supposed to fit up to potty training, you just fold them differently as they get bigger.
Waterproof pants-You should be able to put most wraps over a folded terry although some will fit better than others. I've used my normal wraps (Motherease rikki) over a prefold (bit like a flat nappy) and they fitted absolutely fine.
Bucket-The only time mine smells is if I forget to close it lol. I dry pail without any oil (keep forgetting to try it) and wash them every other day. I use bio liquid and haven't had any problems. You only need to use half as much washing stuff as for a normal load and if you can, run an extra rinse afterwards. If you get detergent build up on the nappies it makes them less absorbant.
I've had a quick look at the mothercare kit and tbh I wouldn't buy it. There's nothing wrong with the nappies but most of the other stuff you either don't need or can buy cheaper/better from else where. I think that if you only have 12 nappies you will be washing them before you have a full load just because you have run out. The plastic pants are supposed to be a bit rubbish as well, because you can't adjust them they tend to leak alot as they don't fit well. Nappy pins are a faff! you can buy something called a nappy nippa which does the same job as a pin much more easily and without any risk of sticking a pin into anyone. If I were you I would buy:
3x6 Terry nappies from mothercare
cheap lidded bin/bucket from B&Q/Wilkinsons etc
nappy nippa's, paper liners and wet nappy bag (for when you are out) from somewhere like Kittykins
3xwhatever wraps you fancy, these are the more expensive bit, can be £8 each but worth it if it means you get no leaks and keep using the nappies.
I think that's everything you would need, it works out a bit more expensive but your grant would still cover at least half of it and it would propably be worth the extra as it means the nappies will work better and you are more likely to carry on using them.
Hope that helps, sorry for the super long post :roll:
Kerry xx