1. Your luggage will be taken off of the plane at IST and put on the DLM flight. You won't need to worry about it. (If you're still unsure just ensure that, when you check-in at Gatwick, your luggage has DLM tags attached to it.)
2. Domestic.
3. You don't have to book-it. You can pay on entry.
If you've already completed the booking and have received your tickets / boarding passes, your seats will already have been allocated. You might be able to change positions at check-in without incurring further costs but don't rely on it.
Don't forget to buy your E-Visas online. Use this site ONLY
https://www.evisa.gov.tr/en/ All others are a scam.