I shoot raw for everything including macro. It doesn't improve image quality by itself, but like others have said it gives you flexibility. It gives you more flexibility to control all the sharpening yourself (you could also do that by shooting jpg and setting sharpening in camera to 0 though), I'll often spend a while carefully tweaking the sharpening on macro files to counteract diffraction softening as well as possible.
R.e. what to set your camera to, raw is raw. The other settings are just for having the camera also save a jpg of various quality settings alongside the raw file.