I think that a light machine oil applied inside one of the air lines, only about two or three drops, before you connect the air lines for the first time should last you for a very long time. When the system is pressurised, the light oil will be distributed throughout the retract system

I have never found a need to externally lubricate the retract mechanism itself. The downside of doing so is that the lube, whatever you use, will attract dirt and grit of all kinds. This will make it necessary to get in there and clean and relube the external mechanism from time-to-time.

120 pounds of pressure is not too much but is probably waaaaay more than you will need for normal operation. 100 pounds will be quite sufficient. Having said that, I have a Jet Model Products T-33 which has JMP retracts designed for the kit. These retracts do not mechanically lock in the up position so it is necessary to use 120-130 pounds of pressure to keep the gear from "sagging" out of the wheel well during a turn. As long as your gear has a mechanical lock-up action, then you do not need this much pressure.