I can't imagine how your DNS settings interferes with the Elgg installation.

Whether to use or not to is not a part of the regular Elgg queries. You can use it if you want to (I do).

You can change the site email on the basic settings page in the admin section of your Elgg site. But the server needs to be configured correctly to send emails as Elgg has no built-in email server capabilities. Depending on your hosting plan you might need to create an email account on your server and you might need to configure the email server settings on your server (CPanel etc.). If you have trouble with emails getting sent/not sent, you should contact the support of your webhoster to get it fixed.