Here's how I plumbed mine:
Identify the tranny-to-radiator line. On the driver's side of the radiator, you'll see where the two hard lines attach. The upper line is the one in which you want to install the filter. I chose to locate the filter base on the inside of the passenger side frame rail (just in front of the sway bar). I had to angle the filter base slightly so that the bottom of the filter (when installed) is closer to the radiator than the top. This helps to clear the sway bar. It's a pretty tight fit in there so I used 90 degree barbed brass fittings to attach the rubber hoses. As the hard line (from the tranny) routes forward, it takes a 90 degree bend toward the driver's side of the truck. I cut the hard line there and used rubber hoses to complete the circuit to and from the filter base. This will route the lubricant from the tranny, to the filter, to the radiator. Now, mount the aux. cooler. I cut the other hard line just under the fan. Again, using rubber hoses, I added the cooler to the loop. The circuit should now be: Tranny -> Filter -> Radiator -> Cooler -> Tranny. You're done! You could also take the opportunity to install a tranny oil temp gauge and use the filter base as the location for the temp bulb. As for additional Mercon? I filled the filter and cooler before installing them. I'll bet it's less than a quart, total. But, it never hurts to have an extra quart or two on hand, just in case. Be sure to use teflon tape at any threaded joints and double check that your hose clamps are tight.
Hope this helps - Dave.