I missed this year's GBWC but I'll be joining next year. It's really not that strict, although some regions have region specific rules. So it's worthwhile looking up if your country/region has any additional rules. These are general answers,
No, you don't need to match the box. Kitbashes are welcome.
Dioramas are not necessary but you can do them. Make sure you meet size limitations, where I'm living they're displayed in cases so the dioramas are limited to the size of the case. Also, usually models have a size limitation as well, where I'm living it's a 20cm (20cm h&w) limit, which is pretty big unless you're doing a PG kit.
I've seen people that do less than custom paints. Where I live they also have different categories like junior, SD, etc etc. So there's a lot of options and opportunities. No need to be nervous. Put your best work forward and hope for the best.