I came back from NZ last week, so I can answer some of your questions:

- Picking up a car in one city and dropping it off somewhere else is not a problem. I picked up a car at Hertz in downtown Queenstown and dropped it off in Dunedin. If there was an extra fee, it wasn't significant.

- Milford Sound is beautiful. We got there by walking the Milford Track (I don't think they let you walk it in the winter) and we were driven back to Queenstown by bus. The drive took about 4 1/2 hours, and the mountain pass to get to Milford Sound can be tricky, especially in bad weather (there was light rain the day we did it). It was a series of switchbacks, the visibility was not great and there is a long one-way tunnel with a 15-minute traffic light at each end. If you are unlucky the road could be closed.

http://www.milfordroad.co.nz/html/about.html