If you use the proxied config and configure your uTorrent appropriately, you should be able to download and play at the same time. Of course your game will probably be affected though, best not to have any other downloads going when you're gaming.
I don't know about the server locations, don't have MW3 myself, but there should be local Malaysian non-ranked servers. You'll have a better connection to them if you connect directly without using the VPN.