The cover should float on the water, and ideally reach the walls on all sides but not drape over the coping. If you have some water still exposed it's no big deal, you're just not getting 100% of the possible benefit (which is mostly reduced evaporation).
Not sure what you mean by 'the stepping area'?
Buy the cover the same size as the pool. My solar cover pretty much lays flat on the surface of the water with a bit up one side of the edge. Its perfect when its flat, but we don't usually get it perfectly flat. We didn't cut the cover for around the ladder, it's just kind of is there. The idea of the cover for us is to keep leaves out and temp up at night when we aren't swimming. Wrinkles on covers don't bother us...