My answers come from 11 years professional nursing experience, and 2 years of actually nursing my own children, so both a nurse's and mother's perspective.
1. Nipple confusion is highly over-rated! I don't believe that "nipple confusion" is really an issue for about 99.9% of newborn infants. In my experience, it is preferable to offer only the breast for the first several days, until mother and baby are both skilled at nursing, and a good milk supply is established. But I have never seen a baby's ability or desire to nurse be ruined by the occasional artificial nipple, either pacifier or bottle. Remember, breastfeeding is not instinctive. True, babies are born with certain reflexive behaviors that promote breastfeeding, but is a behavior that must be learned by BOTH mom and baby. Some moms and babies learn faster than others, just like any skill, and offering a few sips of formula to a hypoglycemic baby, or a pacifier to a newborn with an insatiable desire to suck is not going to ruin things. (Not that these things should be taken lightly, or done without consulting the parents, but they will not ruin the baby's desire to nurse!) In 11 years of OB/NICU nursing, I can only recall only 2 babies who were unsuccessful in establishing breastfeeding. We worked with these babies and mothers for weeks, long after hospital DC, utilizing a lactation consultant to do home visits, but neither was ever able to establish regular nursing. Frankly, neither of these kids were great bottle feeders either, which leaves me to wonder if there may have been some undiagnosed neurological reason for that. Usually, it is the mother who calls it quits, not the baby, which is too bad, because most times, it is possible to intervene and help establish nursing, if that is what is truly desired.
2. Yes, there is a correlation between breastfeeding and jaundice. The only flaw known to exist in breastmilk is that it contains a substance (the name of which escapes me) that delays the excretion of bilirubin, leading to a potential for newborn jaundice. Since breastfed babies typically receive less volume of fluid in the first few days of life, until mom's milk comes in fully, slight dehydration can also be a factor. Bilirubin levels tend to peak in healthy babies around day 4-5 of life, which is about the time that most mother's milk comes in. Many pediatricians will tolerate a slightly higher bili level in breastfed babies than bottle fed babies. Rarely is "breastmilk" jaundice severe enough to prompt treatment in a healthy full-term infant. Any infant who requires treatment for jaundice should be evaluated for other possible causes, such as undiagnosed infection, or blood type incompatibility.
If treatment is necessary, it can be accomplished at home with home phototherapy. This is the route I chose when my healthy 36 week preemie required phototherapy. No way was I going to admit her to a NICU loaded with germs! Being at home enabled me to continue nursing her. Unless a baby's bili levels are so high as to be approaching exchange levels, it is usually not necessary to interrupt breastfeeding during treatment for jaundice. The quickest way to bring a bili level down is to encourage stooling, which breastmilk does very well!