This is how we play in the UK:

2 blinds, one on the button, one off.
5 cards, face down.
Round of betting.
Discard 2 cards.
Turn up one card of choice.
PL Stud H/L from there.
Deck is reshuffled including burns if out of cards.

Things I have noticed is that hands which are above average/good in normal Stud 8, aren't really all that.

Stuff like A35, A26, 235, are now only OK, not good, and stuff like 357, 468, 367, 567, aren't really good enough.

Three reasons:
1) everyone is dealt 5. so hands like these are much more common.
2) it's pot limit, so if you connect on 4th with a 7 or an 8 /end up making a 7 or 8 low, it's really easy to be put under a lot of pressure. you need to make "home run" type high equity, it's really really important.
3) There isn't really a lot of money in the pot to begin with, so there's not much incentive to get involved unless you have a really good starting hand. The incentive comes more from stacks.

My first question is how much should I tighten up, should I really be narrowing it down to low 3 flushes, 3 consecutive straight cards under 5, maybe a 1 gapper with a 2 suit at a push, plus trips/aces?

I really struggle to get the right balance, plus everyone else is playing the game so incredibly loose!

My second question is whether it's right to avoid calling bets with low draws if I have no significant high equity, even if it has an ace in the draw, like I take off with A35, now I hit a 6 or 7 on 4th, someone with two wheel cards is betting, or a guy with a high paired board is betting. Should I really be calling pot sized bets with these hands?

I hate that it's pot limit but everyone in the UK hates limit poker and doesn't understand the tremendous value of it for the play of the game and the longevity of the poker economy.

First question, you have it pegged down! Great thoughts, right attitude, and since people are playing so loose and no money goes in early, what a great spot to just wait and always have the best hand going into 4th street. Great mind set! tight is right! You may want to adjust your image maybe one hand every half hour to keep them guessing but all in all you have the perfect nitty mind set to kill this game and always be a winner.

Second question, You want to call pot sized bets with draws to scoop only. And preferable open enders to wheels, with all your cards live. Also you can take into consideration villians possible hole card holdings when making this decision if your bingo cards are legitimately live. Make them call pot sized bets when you have the best of it not the other way around. Make them guess and gamble. You will get run down like we all do, and the only beats you will take will be just that bad beats, so know that going in and don't get frustrated. Live cards, live cards, live cards. I would also add low trips to your arsenal as well.

I also think I whiff 4th so often that I will go through huge swings if I raise at all on 3rd.

So I have been trying to get to 4th for just a limp and folding if anyone puts in major action.

Seems like anyone raising on 3rd usually has trips, aces or 3 steel wheel cards.

Right approach?

Most of your starting hands will want multiway action, and then by limping or calling you don't give the strength of your hand away until 5th street where the big money goes in. I think your approach is sound Lucius.

Please keep posting after your next session, I'm very interested on how it goes.

How many players see 4th street? 5th street?

What are the stack sizes?

If you don't like hands such as 567, I'm guessing that pots are multiway and stacks are short. In games such as these I would be playing only monsters with scoop potential, would be betting the minimum amount necessary on 3rd to ensure that I could get an entire effective stack in by the river, and would be folding everything on 4th that didn't hit me hard.

Varying stack sizes.

The reason I don't like 3 card lows above 6 is that it's so much easier for people to have lower cards than in regular stud 8, so stronger lows tend to get made.

Agreed. But if you were heads up against a Jack door, then a 567 would be a thing of beauty and a joy forever. Especially if you were live.

True but we don't get to see doorcards on 3rd, they are only revealed on 4th.

Being able to choose your own doorcard means hands are much more nutted IMO

High trips are not good in this game. Aces should be pretty brutal also. Basically good connected lows mixed with low trips is all you can play and you don't have much incentive to play other hands anyway with these small antes. If everyone is playing way loose you should jam your strong range on third and embrace the variance. If stacks are shallow you can get a lot in good and see all 7 cards when all in. If stacks are deep you can start building pots with good potential scooping hands. Need a good bankroll so you can play correctly.