1. What wattage lamps are recommended here ?

For what kind of corals? 175w X 2 will be fine for low light, 250w X 2
should handle most SPS. If you want very color SPS, go for 400w X 2. But
dont even think about keeping softies if you go with 400w. ;p

2. Is there a recommended distance from the water surface ?

As close as possible as long as it doesnt over heat your tank.

3. Do I need to install a fan or two in my canopy for the heat ?

Yes, and maybe even an 6" clip fan or two, depending on what bulb you use.

jc