Changing from an iPhone 3G to iPhone 5?

I recently got an iPhone 5 because my iPhone 3G is on it's last legs and I'm starting to feel a little sorry for it xD
The iPhone 5 is a hand-me-down from my boyfriend so it has already been previously used.
Anyway, I'm alright on technology but I'm unfamiliar with apple, I've never changed from an apple phone to another apple phone but I'm aware that apple get funny with you using two SIM cards within an iPhone.

So I have a few questions and I'd really appreciate it if you'd try to answer all:
1. Isn't iPhone 5 only compatible with a 'nano SIM' and if so how would I exchange my regular sized SIM to a nano without changing my number or contract?
2. Will my contract cost more per month?
3. How do I transfer all of the stuff to the new handset? Surely iTunes wouldn't work because it's a new account
4. The phone seems to be completely reset but will I be able to create a new apple account?
5. If I create a new apple account can I still connect it to iTunes and transfer the data from my old phone?

I'm really sorry if any of these questions are blatantly obvious or stupid.

1. Yes, the iPhone 5 (& subsequent models) use nanoSIMs. You could either cut your miniSIM (what the 3G would have used) to size or ask your carrier to issue you a nanoSIM with your number on it. Should affect your contract doing this.
2. Again, shouldn't have an effect on it
3. ITunes is what you use. Backup the 3G & then restore from that backup on the 5.
4. You could just continue using your own from the 3G (what you would have been using to buy apps, media, etc)
5. Wouldn't need to make a new account to do this.