battery/GN flash confusion

[Nearsighted]

Hi,
I recently purchased a nifty little black Oly 35 EC. The batteries (2) needed for this camera are this 1.35 volt mercury type outlawed in the US.

Question #1. Is it true that 1.55 volt silver oxcide batteries can be used instead of the 1.35 volt but you have to adjust for the higher voltage by two stops. Like for 400 speed film you would set the ASA setting to 100. Does this sound correct?

Question #2. With the flashmatic "GN" system on this camera, would you set the guide number for the film you are using, or for the compensated ASA setting on the camera?

I hope someone out there understands my questions.