Frames are indexed by search engines. I use frames on my site and all of the sites that link to through frames have a backlink from me... I check it daily
No, do not use i-frames. They are not SEO friendly at all. Design a HTML site instead. Also use Div classes and not tables.
even if it is displayed inside the frame, Google should still index the content (if it is a dofollow link). But frames are not the best practices from SEO point of view.