1) Disk Cache on increases battery life if you browse a lot, and decreases it if you rarely / ever enter the filetree (someone who uses long playlists, and doesn't browse the filetree to change what's playing often).
2) Database is only used for the Database view, basically browsing your music by artist, album, genre, or otherwise instead of using the filetree.
3) Then don't try to play your WMA files. It does sound like you're describing buggy behaviour though, but I'm not sure the exact steps you're going through.