Steve and Grispie are pretty spot on - reduced sharpness, low contrast, reduced saturation, give you more range in colour grading/colour correction later.
Mjpeg -> Yes, it is a lower workload for the CPU and GPU in editing. You can edit HD mjpeg on a Pentium4, you need an i5 to edit h.264 with smooth playback in timeline scrubbing.
Each individual Mjpeg frame should look similar to what your camera shoots if you were able to set HD frame size when taking Stills.
(I have no idea what the frame sizes available in the K5 are)
On my K-01, if I need to match a Canon shooters footage, I can get a close match to their Normal look using Natural, with some tweaking of the contrast and highlights.
Pentax's Muted setting matches Cinestyle very closely.
Staying with Muted, it's my opinion that reducing the contrast two notches and raising the highlights two notches gives an very wide dynamic range to play with.
Regardless of Mjpeg or h264, if you light a scene so that no area is over or underexposed, you will get less breakdown of the CoDec as you adjust the footage in post production.
There are arguments for and against for 'Conforming' your footage from the in camera Codec to something like ProRes, personally I don't because every time you process the footage you loose some data, due to the types of transform functions used, and because the NLE I use will 'Edit Anything'...
( I'm using v6.01 at the moment -
EDIUS Pro 7 | Grass Valley, A Belden Brand )
Colour Grading, beyond the basics of making sure the colours conform to the correct technical standard for your delivery platform - say REC709 for Broadcast - once you've met the standards, the grade becomes a subjective matter - whether the colours as shot match the mood of the scene. You can add warm tones for romantic pieces, blues for cold clinical action, etc etc.
There's some pretty good examples of what footage will look like 'as shot', and as the grading procedure occurs here -
www.kinefinity.com/support/downloads/shots/?lang=en
On Grispies point 2 above - all decent NLE programs will have a waveform display available.
It's worth getting to know how they work, and what they mean - and knowing that they represent something completely different to the Histogram display on your camera.
When shooting, I always have the histogram on, and I aim to have the curve displayed being largest in the middle of the graph, not bunched to either end.
That way I know most of my scene is well within the dynamic range that the camera can capture.