1. Joomla 1.5 templates require minor modifications to work with Joomla 1.6 such as updating code and files like templateDetails.xml.
2. Developing templates for Joomla 1.6 involves using tools like MAMP, Dreamweaver, and FileZilla to edit template files which include PHP, CSS, images, and XML files that control site layout and design.
3. Key template files are index.php, templateDetails.xml, and template.css which define things like module positions, configuration options, and site styling respectively.