I have a Tubus rack I haven’t used for years. It comes with lots of bolts and washers.

First question is should i put washers on either side of the rack (in particular against the frame)?

Second question, the holes on the rack came with fancy painted bolts inserted (Felt cross bike), I’m assuming I replace those with the ones that came with the Tubus?

Washers are there to spread the load. If you can see that fitting without the washer would result in too much dependency on a single point, then fit washers. No reason not to have washers in multiple places. You might even find that you need some larger spacers to fill gaps.

The hardware required to fit a rack on a bike is pretty generic (M5 bolts usually I think?). No reason why the painted bolts that came with the bike wouldn't cope with the load, although you might find that they are not long enough.

I always tend to pick bolts that "match" but that is just my weakness. Doesn't make any difference to the security of the installation.

I don't use anything but stainless steel bolts