Yes JIRA core must be installed first, then Jira service desk sits on top of it.
THe second question is something that perhaps you might want to do some reading /watching
No. Jira Core is the Jira framework. Jira Software and Jira Service Desk are applications that add functions on top of that framework.
You can get Jira Service Desk and Jira Software as installer packages, but they are just bundles of Core + their application.
Confluence is a totally separate system with its own install.
Core is not showing you "to be installed", it is asking you if you want to add users that would be Core only. They would not get Software's boards or Service Desk's portal functions if you added them.
>better to install Cloud or Server for Service Desk
That depends on what you want to do with the hosting. If you want to pay for someone else to host it, buy a Cloud account (you don't install anything, you just use it). If you want to host it on your servers (or you have another provider who will be running it for you), then you need the Server version.
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