Can I use copper flashing with my cedar roof?

Copper flashing can be used with a cedar roof in most areas, with the exception of areas that are exposed to acid rain areas east of the great lakes.

How much spacing should be left between the vertical wall or skylight flashing and the cedar shakes or shingles?

Heating stacks require 1" space. Walls, skylights and windows that are flashed with metal should be closed. Check with your local Building Official regarding this particular application question.

Do some cedar shingles cause premature deterioration of un-painted roof flashings?

It is unlikely that the cedar is causing the deterioration of the flashings: any metal will rust if exposed to certain elements in the air. Many tropical areas do not allow any kind of galvanized sheet metal on any type of construction.

Can I nail through copper step flashing?

Yes, you can nail through the copper.