Concerning the electrode positions, if do it in this exact order--> I click on EEG lab channels--> MRI registration --> edit --> REFINE registration points
This is incorrect. As this method tries to align two surfaces that are different with a rigid registration method, it may fail completely, the outcome is random. There is no reason for which it should give a result you can trust.
As I already wrote, you should either register manually the electrode on the scalp, or use standard electrode positions available with the Brainstorm distribution.
which looks good to me, the electrodes appear to be in the correct position, what do you think?
We don't know what you can looks like and how it was placed on the head of your subjects: you are the only person who can decide on the quality of the electrode positioning.
If we use the baseline day 1 data as the noise covariance, would this corrupt our event related synchronization /de-synchronization analysis? Or is the noise-covariance sort of like a event-related synchronization/de-synchronization analysis on it's own?