Perhaps we could even build a wiki page for it.
Superpolator has a help file that covers everything you need to know. Load masters, assign an axis, create instances, done!
As for automatic updates, yes, Superpolator tracks changes to an open UFO file and automatically updates. I find the best tool for managing this is Tal Leming’s UFOCentral script.
As for where to put the UFO/SPE files, it doesn't really matter. But to keep myself from getting confused I usually just stick the SPE file in the parent folder for the family and leave the UFO files in child directories created for each master font.