What kind of returns are we using? Are we pulling these directly from CRSP database or are we calculating these? CRSP has Equal-Weighted and Value-Weighted Returns. Which should we use?

We assume you mean parts (1 and 2) of the question pertaining to the CRSP index volatility. We're interested in index returns so you may use the CRSP-provided returns (i.e., DO NOT calculate the returns yourself). Since the EW indexes are hard to find in the real world, you should use VW (i.e., VWRETD or VWRETX; the dividends should not affect the volatility calculations very much).