One thing jumps out at me. Is it a club or a sword? It has no edge to it. I would recomend goung for a nice clean edge to set off the detail nicely. It looks a bit bussy as it is. A really quick paint over.
I think you could use some more hard edges in you model,currently it has this molded look,not ragged and bulky as it should be. bootstraps and metal clasps should definitelty have some hard edges.
Perfectly normal and VERY usefull aswell, if you look around the edges you will see it in most normal maps :) Here you have some info on it: http://wiki.polycount.com/EdgePadding?action=show&redirect=Edge+Padding
You can change the wireframe colors in the settings. You can change the edge display settings in the Custom Polygon Display Options. You can only set it to change how soft/hard edges are displayed. Not their colors.
Oh i will at least a polygon bevel, want to try and make it as low poly as i can while keeping as much of the detail of course. would subdividing a edge by 3 then after baking deleting the other 2 keeping the seam edge fix that ?
Alec already mentioned what the problem is, thin triangles. Try and delete the edges and cut them like I show here. Bartalon is also right about adding hard edges, which will help other parts looking flat.
Bleed the edges for sure! A lot of artefacts at edges is caused from not bleed pixels around islands. Use "Solidify C" from flaming pearls. Free photoshop plugin package. There are A and B presets but for me best works C preset.
When using cut tool, the mouse pointer will change depending on which sub object are you hovering over (whether vert/ edge/ face), so make sure the mouse pointer is edge before you click to start cut.
Why? Soft can be a bad choice of word because it implies blobby, really "wider edges" would be better, but currently his edge width is so tight that everything looks unnaturally sharp even when viewed up close.
Here's an extra technique that produces nice quads on certain amounts of segments that wasn't mentioned yet; 1) use the Border selection mode to select the open edge 2) deselect two opposing edges 3) hit the "Bridge" tool