Q: what is the best way to convert US dollars into yen? (are there atm machines, do we bring travelers checks, currency exchange booth at the airport)
A: You can exchange at the airport. The rate is pretty good. Travelers checks earn you a bit more on the rate but generally since they cost money to make aren't worth it. They will NOT be so easy to use in Japan. I recommend cash.
Q: what is the best way to get from point A to point B? (do we need a rail pass, should we rent a bike, night bus)
A: This all depends on what you want to do. I almost always get a rail pass, but that is because I visit places far outside of Tokyo. If you are just traveling locally, get a SUICA card at the JR green window and put some money on it at the machines. Trust me! It's so much easier than buying tickets all the time. Night buses are cheap and you can even get a 3 day bus pass but I have never done this. I LOVE THE JR RAIL PASS.
Q: Where is the best and most affordable place to stay? (youth hostels, business hotels, dorm rooms, ryoukan)
A: Check out Sakura House (http://www.sakura-house.com/
). If you rent an apartment it MIGHT be cheaper than a hotel, but I would investigate the many options. You can even call them and ask tons of questions in Englsih. They have all sorts of accommodations from apartments, to hotels and guest rooms. There is a ton of paperwork but overall it's a really great service. You should try to be near the train station as it will be your primary travel method in Tokyo. You will do a lot of walking in Japan!
Q: What Japanese regulations are different from the US? (drinking age, age to rent a hotel room, etc.....)
A: You can drink and smoke from age 20 in Japan. Other than that Japan is pretty much similar to America.
Your age of 17 is going to perhaps be an issue. So I recommend you do EVERYTHING that you can in advance.
This way you can have your parents involved if you need an "adult".
Q: How cooperative and or friendly are the Japanese people when approached by a westerner?
A: Japanese tend to be very friendly. Twice this trip 2 random people walked up to me when I was looking at a map and tried to help. A 3rd guy was "acting" like he wanted to help then he asked us for 500 yen. This is not so common. When you are going to take a train it's always a good idea to ask the staff at the station near the turnstile which track to go on etc.
Q: What should we do while we are there? ( karaoke bar, Akihabara, Shinjuku, Shibuya, skiing,)
A: Karaoke bars are one thing, but the most common karaoke in Japan are not bars, but are private rooms you rent.
If you have Japanese friends this is a MUST DO activity. In Ikebukuro there is a great Antoni Inoki (pro wrestler) themed restaurant that I went to for the first time and it was super fun. Akihabara for the electronics, (the Yodobashi Camera store is amazing). Shinjuku, Shibuya are great fun because there are SO many people. Skiing!?!?! I don't know much about that.