Before ever thinking of getting your Character a subdomain or domain and a host, you need to register him/her an email address. There exist a variety of services that offer a free webmail, sometimes with a bunch of nice options to add to it, like email forwarders. Although, as of personal experience, I would recommend Gmail; the reasons are the following:
- it does not expire: many services allow up to a set time of inactivity, like Yahoo!Mail or Hotmail, and if you don’t login within that time span, your account is going to be disabled, resetted or deleted. You don’t wanna take up the risk…
- it does have 7GB of diskspace: that’s hard to beat; stay away from 10MB email services, unless it’s your host to offer it (you can make it a forwarder, if you wish; just ask): they will run out of space before you even realize it;
- it allows for as many email forwarders as you wish: if you only want to create ONE email account for all of your Characters, and use email forwarders to get all Characters’ personal emails in that same account, you can do so in Gmail, and there is no limit to the amount of forwarders (there is a limit of 5 for POP3 accounts instead);
- no spam: you’ll get no spam from Google for using Gmail; you may still get spam by other senders, but the Spam folder in Gmail is very efficient.
Of course, this is only my opinion. You’re free to register your Character’s email at whatever service you like.
Your details OR your Character’s details? Well, that’s a good question. My advice is to register the email address using your Character’s details (full name, birthdate, residence, etc.) as you have sketched at Step 1. It will help making your Character more real, and it would avoid embarassing things (i.e. mistake your Character’s emails for yours, etc.).
What to use the email for? To apply for a free hosting account (subdomain or domain), to join a forum (I’m making forum for Characters too 
), to signup for a newsletter, for you to write him/her reminders, ideas, etc. Of course, when you apply for a hosting account, write a side note and say that this is your Character, not a real person.