It is a cloth that was Decimated in Zbrush. It seems that the artifact is actually following the edges of the polys, I try pretty much everything but I can't quite handle it! I thought it is something from the cage and try to make the mesh more densed it got better but it didn't fix everything. I'll be grateful if someone can help me with that, 10x in advance gise.
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2. As to crashing etc, you may be running out of video memory. What GPU do you have and how much VRAM does it have? One thing you can do is remove any unused meshes from your scene, and make sure any other art or VRAM heavy applications are closed when you go to bake. You can try decimating the high poly mesh to reduce the geometry count as well.
3. It looks like the baked normal map may have gotten applied to the high poly material, this can cause recursive bake errors as the baker tries to essentially bake the normal map back onto itself. Make sure that the high and low poly materials have unique names, and that you've cleared the normal map from the high poly material and this should go away.
Yeah smoothing as in smoothing groups. From the screenshot it looks like the smoothing is set somewhat arbitrarily. If that is Modo try setting the smoothing angle to 179 and exporting the low again.