1. Do I have to convert my existing JAR licence to the new EASA licence or will it wait until it expires?
Your JAA licence is now an EASA licence; you don't need to do anything untill it expires then you renew it as a lifetime EASA licence. Any CAA licencing action prior to that date will require the issue ofa new EASA licence at that point.
Should I apply for the NPPL or keep my existing licence and take the 2 year test?
Thats your choice, bear in mind that if you fly an EASA aircraft you will need an EASA licence. For the sake of a 2 yearly proficiency check, why throw away a licence that has cost you a lot of time and effort!
3. Do I log my microlight hours in my existing logbook or should I keep them in a separate logbook?
Its your log book, do as you wish. If you are unlikely to ever fill it, why would you want two books?