I hope this message finds you well, present circumstances excluded. I am a licensed IP attorney with over a decade of experience handling matters just like this one. It is a pleasure to assist you today.
I will answer your questions in the order in which they appear.
Should I do this before sending out manuscript to publishers and agents?
It cannot hurt. As you know, pre-registration is not a substitute for registration and you will eventually have to register the work once it is finished. Technically speaking, preregistration is designed to provide a source or basis of protection for works that are not complete or that may be edited or amended. Your manuscript can fall into that category and therefore this can be viewed as an extra layer of protection for this work before disclosure.
Are two fees involved – one for pre-Reg. and one for actual registration?
Yes, the pre-registration fee is approximately $140, while the registration fee is approximately $40.
is there a rule to follow (i.e. number of words in quote) where I must/should seek permission from writers or publishers for use of quote?
Dave, there is not. The main thing, as you have done, is to give them proper citations, either through footnotes, an index, etc. If you have done that, then you are good to go.
Let me know if you have any other questions or comments. Please also rate my answer positively (4 or 5 stars) so that I can receive credit for my work.