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UkIan
1) How do I ascertain what level of microstepping I require?
There's no fixed requirement, in principle all settings work. That said, 1/16 for belt driven axes and 1/8 for threaded rod driven ones is a good choice.
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UkIan
2) Will this necessitate a change in the Marlin code?
Not code, but its configuration. See e.g. [reprap.org] Adjust steps/mm for your microstepping, not the opposite way.