Suppose I want one of my capital ships to be the fleet flagship, how do I create a fleet with the capital ship as the flagship.
The fleet leader is the primary selection (the whitest selection box). You can use tab with a group of ships selected to cycle through the primary target to what you want it to be. However, I find that drag selecting a group of ships almost always leaves a capital as the primary selection.
Second question, how do I increase or decrease ships from the fleet?
This is a bit more cumbersome. If you want to remove ships, you have to reform the fleet without them. Adding them is easier - if auto-join is on, any ship with a waypoint set to the fleet leader, or stopping in the gravity well with the fleet, will join it, with a few exceptions (scouts, colony ships).