You have to submit all transcripts from all schools. They'll see all the credits you've done whether it's on your 4 yr school transcript or not and it will all count for your LSAC GPA.
No, as far as I know, midterm grades are not considered. Your final grade is what will be on the transcript, and ultimately what counts towards your LSAC calculated GPA.
I'd use the GPA calculated by the issuing institution, personally. I wouldn't want to take the chance of being seen as deceptive, and you'll need to submit an official copy of your transcript to the LSAC for your CAS.
You can even apply before your current transcript is available, but the admissions groups likely won't open the application until it is complete with all transcripts.