You can take most herbs, as infusions (herbal teas). However, Licorice comes from a hard root, and is not very well extracted in an infusion. So I suggest you purchase the 1:1 liquid extract.
The official dose is 2 to 5 mL. You can take this 2 or 3 times a day. 5 mL is a teaspoonful.
No. You don't need to take it in milk.
No. You don't need to increase the dose until your ankles swell. Most people get benefits from Licorice without fluid retention. If you get fluid retention, which usually shows up as ankles swelling, stop taking Licorice.
Don't get confused with the candy. It must be the herbal medicine.