you need to assign it to a smoothing group, or weld all of the verts. (i cant say for sure which is the case since you cannot post a picture)
select all of the verts and hit ctrl+w.
if that doesnt do the trick, select the entire model and click on the "groups" tab.
at the bottom of this tab there are a bunch of number buttons, and 2 others right above, "select" and "assign". click assign and then on the #1 button.
that SHOULD smooth out the model, if it doesnt.... i have no idea what is going on with your model =P
as for your other questions
go to the folder with the head model you want to use, grab all of its texture files, now simply copy & paste them into the folder of the model you are working on.
and yes assigning the head bone is necessary, every single vertex needs to be assigned to a bone, else it wont even export to the right format.