To answer your questions:
1) It is amount in excess of 7.5% of AGI (this was a change --source: https://turbotax.intuit.com/tax-tips/health-care/can-i-claim-medical-expenses-on-my-taxes/L1htkVqq9)
2) You can tell them that it is for medical, it will still probably have the same code on it. They should withhold 20%, and if they don't I would have them do this, so you don't have a tax bill when you file the 2018 return.
When you enter the 1099R on the 2018 return is when the tax will be computed and you will get credit for the taxes withheld when you got the payment.
Now, please consider this very closely as it is expensive to take an early withdrawal.
You will have regular tax (based on income may be 12% or 22% as I do not know exact income or filing status), probably at least some of the 10% penalty, and State income tax depending on where you live.
I just had a customer who lost 40% of the amount taken out due to Federal State and 10% penalty on the early withdrawal.
3) It is actual medical paid during the year, so if it 2018, then all medical paid in 2018 is counted (nothing paid in 2017 matters). Then this amount has to exceed 7.5% of the AGI.