the foam-backed fabric is great.
Usually you want people at least 6 feet away. You don't really need to have them much further than that, especially if you're not lighting the background. If you're just using two umbrellas, 6' works great.
Umbrellas or softboxes doesn't make a difference. Umbrellas are easier to setup, so if it's portable, I'd say umbrellas. If it's a studio situation, I like softboxes... a bit better light quality, IMO.
Don't light the background if possible. You want the background to be about a 1/2-full stop darker than the foreground subject. Lighting the background separately makes it more likely the background will be overlit and 1) be too bright and 2) be casting green spill into the scene.
If you're doing a lot of greenscreen, get dedicated greenscreen software. I'm biased since we make a photoshop plugin for it, but honestly the time you save will pay for it. If you're doing a couple hundred shots, saving 10 minutes an image is a big deal. If you're just doing a greenscreen shot here and there, PS is capable but it's difficult to get fine detail like flyaway hair. You'll notice most PS tutorials dealing with greenscreen use black or slicked back hair. Much easier to deal with than a blond with a perm.
As for lighting, a white back/hair light will go a long way to dealing with any green spill. But if you've got 6' of distance b/t subject and background, it's not really necessary.
cheers,
Jim Tierney
Digital Anarchy
www.digitalanarchy.com