Wow, never heard of this but I'm sure going to try it too! That's what's so great about this forum, we learn from each other often if not everyday! Thanks for sharing! :thumbup:

To directly answer your question, some quilters dilute it, some don't. If it's slightly thick, a 3:1 (water:glue) ratio has been suggested.
Bottle: Straight from the bottle it comes in (unless you buy the gallon size, then you might wanna also buy the smaller bottle to refill).
Tips: The orange one that comes on it works fine, or you can find tips mentioned in the first link below.

There are recent threads on glue application- this one from Jan on the specifics of sandwiching with glue
and this one in the tutorials section on general application of, uses for, and types: http://www.quiltingboard.com/tutorials-f10/how-use-elmers-washable-school-glue-because-yall-asked-t217470.html

I haven't tried gluing my borders yet. I'm going to have to bite the bullet and give it a try.