The loose stitch on the end ranks right up there with curling stockinette.
For your situation with the size being too big, I would go with smaller needles. Makes much more sense than trying to change your knitting style. Some people have to go up or down a few needle sizes to get gauge.
As for the ends, if the edges are important, like on a scarf, I slip the first stitch as if to purl and knit the last stitch. It makes a nice edge. I probably would do it on the pillow you're making since you probably don't want to have seams inside the pillow, but rather weave the edges of the squares together.
On something that is going to be seamed, though, I just knit. Some people slip on everything. There are pros and cons to both. I just like having the same number of stitches on the ends as there are rows in the pattern for seaming, since there are times when you have to ease something in to fit one edge against the other.
As for gauge, I don't worry about it unless it's something that I'm going to wear. Scarves, afghans, pillows, etc., I don't bother with. Even with kids' sweaters--if it's turning out too big, they'll grow!