Psd or png to ai

Hi,
A bit of a long list of questions, I have difficulty finding specific answers. As much as I would appreciate specific answers, just giving broad advice on the topics is also very much appreciated.
I currently need to convert some of my tshirt designs to ai or esp format so they can be printed. I have discovered the trace tool as to fix the problem you get with the lines when you import a psd file to illustrator. What I am still struggling with is keeping transparency of the background.
I did manage to create a ai file from png with a transparent background, but now I cannot seem to replicate it. Also I find it difficult to see IF the BG is transparent since its always white (instead of the grey blocks). atm I check by adding a layer in illustrator and paint something to look if it shows under the original layer.. seems a bit silly.
I've read that importing the png files should solve the problem, but I can only manage to keep transparency when saving as a png, which is not what I need. btw (may be the reason of my failure) I import the psd file and select flatten, since the psd files often contain many layers and I couldnt get the trace tool to work.
So I have a few questions which you might be able to answer; I sort of know the difference between ai and eps, but I dont see any reason to save as eps, is this correct thinking (taking into account I can deliver them in both formats)?
What would be the easiest way to convert psd or png files all with transparent BGs to ai? Is using the trace tool efficient and a good choice to fix the problems with the picture caused by importing psd to ai? should I 'always' use the "place" function to import? Is there anything else I should concern myself with?
Those are a lot of question, hopefully you are willing and able to answer some or point me in the right direction, if you have any idea what I am talking about, cause I only barely understand myself. I thought illustrator was much like photoshop, but it certainly isnt.
in any case thanks
cheerz
Tom
PS I dont dare to ask anymore, and I did not research it yet myself, but what is meant with "text to curves" and "line thickness to paths"?

thank you all, I am now converting the images and it goes well. the terms are thrown at me by the printerstore that is going to sell my designs.
I do have a follow up question though. I have this one design which i want in 4 colors. it has white lines in it. If I enable ignore white, then those lines are removed after tracing (I dont want this), but if I do not enable ignore white, then illustrator will fill the background with white and lose transparent BG. How can I solve this? Plus when I use auto trace and select the number of colors, e.g. 4, then illustrator might still choose to only depict 3 colors, which seems really strange

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