Pick three determines draft order. Say you take State A and I take State B. State A's pick three is 9-9-9, and State B is 0-0-1. You would draft before me (draft runs high to low), and probably first. (9-9-9 can't be beat.) Colorado doesn't have a pick 3.
As for the DH, you don't have to be in the DH division. We'll run it basically like baseball does---when you you're a visitor in the DH division, DH is used, when you host, you don't have to use one. If you're in the non-DH division, you'd basically need a DH for 30 games.