The option at the game setup is just there to allow you to choose whether or not to enable it for those players (i.e., in co-op) that have already bought it.
You will need to complete all 4 campaigns at least once to unlock the ability to purchase infinite ammo for your weapons. You will have to buy infinite ammo for each weapon separately.
The costs for each weapon are as follows:
Handgun: 79,000 skill points
Shotgun: 89,000 skill points
Magnum: 99,000 skill points
Sniper Rifle: 79,000 skill points
Machine Pistol: 89,000 skill points
Assault Rifle: 89,000 skill points
Grenade Launcher: 99,000 skill points
Crossbow: 79,000 skill points
Considering how difficult it is to unlock and obtain, I'm pretty sure it doesn't turn off achievements (RE5 did the same thing with infinite ammo). It's pretty balanced since infinite ammo has to take up one of your skills in your skill set, so you can only have infinite ammo for three types of weapons.
Items can only be shared in split-screen. In all other modes, items can only be trashed once your character picks them up—not traded, dropped, or cashed in. The function of trashing is to make more space in your inventory, and once it's gone, it's gone forever. Co-op drops are separate and unique, so you can't even save "your" herb for your partner (or vice versa).
Best Answer
The smaller white blocks are your stamina. They only deplete when using melee attacks (and quite possible only when they connect?), including counter attacks.
Essentially they limit how much ammo you can save by beating zombies to death!