Which pass would be best?

We are travelling from Osaka to Kyoto for 3 days, then to Takayama for 3 days, then Yuzawa for 4 days then Toyko.
Can the JR pass go on all the different JR lines?
Can you use it on the city lines in Osaka, Kyoto and Tokyo or do we need to get different tickets for that?
Is the railway system difficult to use in general?
Has anyone had trouble finding sitting seats with the general tickets in January. Is it worth the upgrade to first class?

Sorry for all the questions. We like to be prepared.

Jess
Australia