You should try to work from sheet music as much as possible. A lot of sheet music is arranged for piano and this presents problems for guitarists. Piano music uses three staves thus:
A guitar player need only look at the top stave, which contains the melody line (the tune), the lyrics and the chords. Some sheet music does not indicate what rhythm the guitarist should use. This is where your creativity and background of rhythm playing (i.e., rhythms and techniques outlined in this book etc.) must be put to use. You should generally only attempt songs that you know well, and listen to original recordings of these songs to gain rhythm ideas.
The Capo is a device which is placed across the neck of the guitar (acting as a movable nut). This enables you to change the key of a song without changing the chord shapes. It also allows you to play easier chord shapes for songs in difficult keys. To learn how to use a Capo, see Learn to Play Rhythm Guitar or Learn to Play Fingerpicking Guitar.