1. Yes, MC should be installed in Applications and NOT run from the DMG file.
2. Version 21 is the current version. As of right now, the latest is 21.0.83 ,which you can get from the top of this forum. MC22 hasn't been released yet and MC23 won't happen until next year. Stick with 21.0.83 and you'll be on the latest supported version.
3. As Jim said, file not found means that MC doesn't see the file where it used to be. Where are your files? Internal drive, external drive, NAS, etc ?
Brian.