the mud doesn't need any light, it just acts as a fertiliser for the macroalgae and releases other trace elements etc. that may be beneficial to fish and corals.
I'm not sure about the science behind adding coral sand (Navarre recommended it I think so he may have a better answer), but I have a couple of centimetres on top of the MM (although it is getting quite mixed now thanks to my sandsifter).
as for lighting, just about anything will do, but a marine tube might give better growth of macroalgae?
it is advisable to have the lights on 24h a day.
this prevents the algae from going sexual, as well as providing stable conditions.
Macroalgae species is a matter of personal preference as well as what grows best in your tank. Some caulerpa is more prone to crashing - although 24/7 lighting should prevent this. I recommend putting a few species in, and seeing which do best.