1) Pin 3 should usually be connected to either a voltage divider or potentiometer, as this controls the contrast. Looking at the datasheet for your LCD confirms this
2) I've never used the LCD library you are using so i can't really know if you are connecting it properly and defining everything as you should - but i did notice that you are passing EIGHT_BIT in the init whereas you connected only 4 data lines (so you are in fact working 4 bit mode).
3) If you'd like to see reference code for an LCD, see my **broken link removed**. It's coded to use PORTC (so connect DB4-7 to RC0-3 or change the definition to whatever port you are using, but use the lower 4 lines). You'll also need to define IO_HD44780_E and IO_HD44780_RS to use whatever port bit you choose.