1) Am I supposed to be sending out applications now?
Yes.
2) Do I email first to see if they are hiring, or do I just send applications?
No, just an applications. You can say in the email something along the lines of "I am a 1L and am seeking a summer associate position with your firm."
3) I don't have my grades yet. Are people just sending them without grades anyway?
Yes. Send an updated transcript to all firms once you have your grades.
4) What if they ask for a writing sample? Do I submit the memo I wrote for LRW which doesn't have a grade yet? Also our LRW class wrote about a substantive law topic that we have not yet covered so the stuff I wrote is pure shit? Can I just submit a practice exam?
Yes, but do not send a writing sample until asked. Do not submit a practice exam. Clean up your memo.
5) Also geographic-wise, which area am I supposed to target, cities near my school or my hometown? How would the interview process go?
Target areas near your school and any areas you have any connection to.
6) what's the difference btw judicial externship and internship? Is that working for a judge for the summer? Is it paid?
Externship is for credit. Unpaid, but you may be able to get some funding from your school or other grants.
7) If I reach out through school alumni, judges are spread throughout the nation. Perhaps I might have a better chance but does location not matter?
Definitely reach out to alumni. You'll have a better chance if you target alumni that are in an area you want to practice in and have a tie to, and alumni who practice a type of law that you can or have demonstrated an interest in.

How the fuck are you supposed to be an optimistic and confident 1L?
Just wait...