Richard,
The reason we install with a 1.5.0 JRE is because that is the most recent version that Eclipse is certified and tested to work against. Changing the startup parameters as you did to run with JDK 1.6.0 is highly discouraged because Eclipse and MyEclipse are not tested with that JRE and do not need its additional capabilities in order to function properly. Additionally, since you don’t need to start MyEclipse with JDK 1.6.0 in order to use it during your development of your projects I’d recommend changing the startup JRE back to 1.5.0 in order to avoid any problems with the tools.
That said, to use JDK 1.6.0 in your projects you’ll first need to configure it as an available (or the default) JRE inside MyEclipse at Window > Preferences > Java > Installed JREs. Once aware of the new JRE, it will be available for use in your projects. After doing that, you can set the default compliance level as you like at Window > Preferences > Java > Compiler.
I think that answers all your questions. If you have any others, just ask.