Release preferences and upgrade settings are not related to each other.
Site collection upgrade -> it means upgrade from SP 2010 to SP 2013 or SP 2013 to SP 2016. Like upgrade from
Android Marshmallow to
Release preferences -> availability of new/preview features inside the current environment for example (not indicative) (Modern lists and libraries experience). Like upgrade from
To answer your 1st question - the selected users will be able to use the modern list experience but not all users.
Whenever site collection upgrade is available, global admin will get notifications regarding its availability. When they choose to upgrade, say for example to SP 2016, all users irrespective of first release preference or not will be on the same environment.
In your case, the No button is disabled as you are already on the latest version. So, whenever you get a notification in the message center, you can change it to yes and upgrade the site collection and everybody will be on the same page. But if you keep it as No, everybody would remain on SP 2013 irrespective of release preferences.
To answer your 2nd question - first release preferences affect every product of Office 365 like SharePoint, delve, SfB, Onedrive etc.
Edit based on comments:
You should keep First release for selected users option and ensure that developers and key stakeholders are present in this. It will ensure that whenever some new/breaking change is available in your environment, they can guide the end users about the changes. Secondly, keep the Site collection upgrade to no,it's the default setting, so whenever an update is available in the message center, you can then decide whether to upgrade or not. Do note that after some amount of time, MS will force upgrade the site collections. But whenever an update it available you will get an option to create an evaluation site and after that you can upgrade the site collection based on what all things that need to change.