The first question I need to ask is, does the fabric have any Lycra/spandex in it? If yes, I would start out using a stretch needle, checking out the stitches. If you don’t like the quality of the stitches, then I would try a Jersey/ballpoint needle. If the fabric is not highly elastic (large amounts of lycra) then use a Jersey/ballpoint needle. I received this information from Rhonda Pierce, the Marketing Director of Schmetz Needles. I asked her a question about the needles a few years ago and this is the advice she gave me.
Schmetz Needles is a wonderful resource for information on needles. Did you know they came out with new needles that have colour coding? š Here is a link to the site with information about needles: http://www.schmetzneedles.com/all-about-needles/#sthash.FmDvbaTo.dpbs You can download the chart to have on hand. š
Regarding your question about knit and downsizing. I am *guessing* the fabric is allowing for both woven and knit fabrics? If I have that correct, then I suspect what they mean about going down a size with knit is the ‘negative ease’ that comes with knit fabric. Does the pattern give a ‘stretch % chart on the back of the envelope? Using Liesl’s information on this site with determining the stretch % of your fabric, you can figure out if you need to treat your fabric more as a woven or stretch fabric.