FTP pages 104-119; Differentiation in Practice

In the midst of completing all the field work, I have spent time looking at the pages specified for tomorrows class. Maybe it is because I am so overwhelmed with all that I have to do, but as I looked at the units, in particular, I doubt my ability to be able to develop anything like that. When do you have the time? Where do all the ideas come from? I want to be successful at differentiating and I know that it takes more work-I just hope I will eventually develop the "know-how." We have learned so much in these few semesters and to apply it all is a daunting task.
My cooperating teacher in field just took a class last summer on Writer's Workshop. She is trying to implement it in her classroom. I had several questions that I needed validated. You talked last semester about not marking up students writing. But it is appropriate to mark what has been taught (capitals, high frequency words, punctuation, etc)-right?!! And it is okay to display work that is not all spelled correctly-right!? Is there a balance between letting the students write what they want and giving them prompts or topics to write about? Sorry for the tangent but this has been on my mind.