2 - What is the best way to Rollover the current 401k balance (less than $10k) to a Roth 401k ? Will that affect the Roth IRA contributions in any way?
You may be allowed to do this, but it would be considered a Roth conversion, and you would owe income tax on the converted amount, which you would have to fund from other financial resources, since you can't divert or withdraw any part of the pre-tax 401(k) to pay the tax on the conversion.
There's no "best" way, you just ask your HR department or the 401(k) custodian if your plan allows it and then you tell them to do it. Once you have the funds in a Roth 401(k) you can allocate it to whatever investment options your plan allows.
If you do a conversion (which is a special type of rollover) it does not affect your contributions for the year, because rollovers are not contributions and don't count against the contribution limit.
You can also simply allocate new contributions to the Roth option and leave your old contributions in the traditional account, you will just have two different accounts at the custodian. And of course, Roth option contributions are after-tax, so your taxable income and tax owed will both increase.
