Understanding the fundamentals behind the FX market

I've been thinking about trading my own money in the FX market for a little while now but I want to understand the main fundamentals of exchange rate fluctuations more clearly before I go ahead. What do traders/ investers tend to look at when creating trade ideas or investment decisions?

I figured I'd ask any of you who likely follow the markets much more often to explain the fundamentals to me in a more laymans form than the academic papers. My questions are:

1.) After reading up a bit on real vs. nominal exchange rates, I have gathered that the nominal rate is most effected by interest rates in each country. Thus if foreign interest rates are greater (ceteris parabis) than domestic, the demand for foriegn currency to invest abroad will push the nominal exchange rate up (more expensive to change domestic currency to foriegn).

I also gathered that the real exchange rate takes this nominal rate pressure and adds in infaltion pressures in both countries to deduce a true cost of foriegn goods. However, does the market eventually factor in this inflation differential into the quoted (nominal) rate in the medium/long run? or does a government usually have to devalue its currency like in the case of Mexico in the 90's?

So would nominal exchange rates be more important for traders and real exchange rates be more important for longer term investers/investments?

2.) One paper claimed that if inflation went up more in the domestic economy vs. foreign economy, the real exchange rate of the domestic economy would appreciate. I was confused because I always understood it as if prices go up than your money (currency) has less buying power over production (assets) and thus the value of your currency is less. What am I mis-understanding that is causing me this inability to comprehend?

3.) I'm really trying to disconnect my mind from the idea that money itself is an asset. I'm trying to think of interest rates/ exchange rates/ returns as claims on production rather than being of value in and of itself. Is there some kind of connections and simplified logic here I should be aware of?

Thanks for any help you can provide.