Newbie needs advice!

I don't have anything to add to the good advice you've already gotten — mostly, a few hours spent with some tutorials on page layout and style creation would go a long, long ways — but a lot of what I read in your post seems to be terminology issues. I can see someone saying "don't use any hard returns," and meaning "don't put extra returns between paragraphs" — or some such. And soft returns have several names — soft return, line break, line return, etc. — and all mean the break you get with Shift-Return, forcing a new line without creating a new paragraph.

InDesign is not like Word or other tools that are meant to be easy to use right from the first blank screen. Any sixth-grader can bang out a report in their first time with Word, right? It won't be very good, or structured well, but it's "good enough." And unfortunately, some large number of users never do get much better at it, using all kinds of messy techniques, spot-formatting every element, avoiding use of styles, etc.

InDesign is a more complex page-layout software and there is a pretty steep initial learning curve. Many things that Word does automatically aren't done for you by ID. You have to set up the document, pages, page flow, text frames, and basic styles before you can even type "Once upon a time..." So don't brush off the suggestions to get a little formal orientation, now, before you set off to learn the app by using. You'll end up way down a road of poor choices and sloppy habits, and it's hard to correct that later. ID is worth learning right, even though it takes that initial time investment, and does not lend itself well to just "learning as you go" until you have enough of a grounding to understand how each new feature or option fits into the overall scheme.

But this forum is a resource for just that — to help you understand all these elements better than any dry tutorial or video can.

1. There is very rarely a need for soft returns. Using the Adobe paragraph composer should provide you with excellent line breaks but you need to learn about all of the options for styles.

2. Hard returns are for the end of EVERY paragraph.

3. Whoever that person was, never listen to them again.

4. Correct. Space before and after is the proper way of spacing paragraphs. NEVER use multiple returns.

I applaud you for asking before starting this project but I highly encourage you to get some training.

Am I correct in thinking that soft line breaks can be used within a paragraph if I want to keep the text in the same paragraph?

Yes, you are correct but you should avoid to use them: firstable, if your text is justified, it will cause horrible spaces between words; and even if your text is left aligned, it will be hard to manage if the text changes since you will find unexpected returns.

And hard returns are for new paragraphs, however, I've been informed that I should only use hard returns to seperate headings from body text.

Hard returns must always be used to create a new paragraph either between headings and body text or different body text paragraphs.

Another person has told me NOT use hard returns at all! 

That is the worst advice I've ever heard! This is absolutely wrong.

I've been also been informed to use 'space before' and 'space after'   to sepertate headings from text and to make space between paragraphs. 

That's absolutely right, but not only between headings and text, it also can be applied between different text paragraphs.

I don't want to be rude, but designing a book requires advanced skills that you do not seem to master…