You will potentially get a number of different responses on this, but the general rules are:
Break it in on the fuel you are going to run it on. 29% all castor is fine.
Use the same prop you are going to fly it on, or one slightly smaller.
With the iron piston version, run it on a rich 4-cycle at first, then at a slightly leaner 4-cycle, right on the verge of the "break". I usually do about 5 minute runs at a time, with about the same amount of cooling in between. After a couple of runs, continue the 4-cycle break in, but lean it for a short burst a couple of times in each run after that. I usually simply pinch the fuel line to give it that short burst of leaner running. That is faster and easier than adjusting the needle. You may have to adjust the needle somewhat during each run anyway, however, for as the tank runs out it will tend to lean out and you will need to adjust it richer to keep it in a 4-cycle mode.
Muffler pressure is not needed as long as you are there monitoring it, and it really makes no difference whether you choose to use the muffler or not during the break in process. I usually do simply because of the noise factor, and the fact that I am going to use a muffler to fly on anyway.
How long to do this is always a guess. With the iron piston engines I will normally do at least an hour on the bench. More does not hurt. I would rather do too much proper break in on the bench where I can monitor it, than try to fly too soon and get a hot run that could ruin the engine.
How do you keep from frying it? By breaking it in on the bench and monitoring each run to ensure that it stays in that lean 4-cycle mode constantly except for those few short bursts of 2-cycle that you give it. You will hear some people say to simply break it in in the air. That, to me, is a sure road to destruction. If you get a lean run--just one in the air before it is fully broken in--you can destroy the engine beyond repair. And lean runs can happen because the piston is too tight (not broken in yet) or because a little piece of "junk" comes out of the tank and gets through the filter and plugs up the needle valve--just enough to lean the mixture.
Careful bench running is one of the best pieces of insurance you have towards a long life for your engine.
And, oh, yes, do not try to hand lap the engine unless you know exactly what you are doing. These engines are hand lapped at the factory already, and should be ready to run. Sure, a "trained professional" (whoever that is) may be able to get a little better fit by carefully hand lapping the parts together, but all he is doing is shortening the break in time with an even greater chance of ruining the engine. Like the stunts of Robby Kneivel, "Don't try this at home."