It will be easier to beat the game first, but for the final story have to beat the game.

Evolving a chao:
You know the animals and the red/blue/green/yellow/purple things that comes out from destorying a robot, give a lot to a chao after a mission. When you see it sitting there doing nothing with it's eyes wide open, then you see cacoon like shell around it, that is called evolving (there might be another term for it). You can buy more eggs at the school across from the regular Chao Garden.

Chao Contest:
It's behind the waterfall in chao graden. Train first.