In options, ISO sensitivity can be set between from 100 to 1600. There is also a selectable AUTO function, which the camera sets the ISO within limits that you choose.

There are mainly two JPEG modes, Natural and Bright. Generally, natural mode with sharpness set to +2 equals to bright mode with sharpness set to 0.

For direct-from-camera prints, Bright mode will be a better choice for JPEG shooters. Generally, K10D makes minimum in-camera editing, to give opportunity for later PS editing.

JPEGs out of the camera give more "film-like" appearance, while RAW gives more detail and color. I think 22-bit converter has an impact here.

Maybe the biggest advantage of d-slr cameras is the ability to shoot RAW. You can reach the maximum quality and detail in RAW mode in any camera. White balance, sharpness, noise reduction, etc is not done in these files. So, it gives more room for post-editing.

Generally USM (unsharp mask) will be needed to get good results from RAW files. Settings will change from user-to-user.  My personal favorite values for USM in P/S are,
Amount = 300
Radius = 0,3
Threshold = 0