Yes, the AO bake is the base of your diffuse map; however, drawing on it directly would be the wrong way of using it. Just make the diffuse texture as you normally would, then use the AO as a multiply layer over it. Shine, glow and normal maps should NOT have the AO.
Personally I prefer working on all four maps in high resolution and keeping the working copies somewhere, in case you want to get back to a texture later, or for rendering purposes. But 4096x4096 textures would be triple overkill for a fighter/bomber; in most cases, 1024 looks just as good in-game.
Since Blender 2.56 or something you first have to enable the scripts you want to use
- in the User Preferences window, Add-Ons tab. When you expand a script, it will tell you where you can find it when enabled. However, the script collection for 2.5 seems to currently be much smaller than that of 2.49 - the poly reducer, for instance, appears to be missing.