Shawn,
No additional changes to the .htaccess file need to be made for JFBConnect to work. If you're using the default Joomla distribution of the .htaccess file, you should be good to go (just copy htaccess.txt to .htaccess).
If you're still getting 500 errors, can you let us know when you're getting them (on login, logout, other times, etc) and the URL in the address bar that's causing them? That will help us provide suggestions for any specific cases you may be running into.
As for the redirects in the component, that's up to you. When the redirects are "Off", the user won't be redirected after logging in or registering, they should remain on the same page. If enabled, you have the ability to always force them to a specific page. Each site is different.. so for this site, for instance, we redirect newly registered users to the Subscriptions page (to make purchasing easier) but turn off returning user redirections so that if the user is on a forum page or elsewhere, they can simply login and respond immediately.
Hope that explains, but if you're still having issues, just let us know!
Alex