1) The blowup of a sheaf of ideals $\mathcal{I}\subset \mathcal{O}_X$ is the relative Proj of the blowup algebra $\bigoplus_{m\geq 0} \mathcal{I}^m$. This is a definition, and we're just applying it to the affine case here where we replace $\mathcal{O}_X$ by $A$ and $\mathcal{I}$ by $I$. Choosing a set of generators $f_1,\cdots,f_r$ for $I$ gives you a surjection from $A^r\to I$, which turns in to a surjection of graded rings $\operatorname{Sym}(A^r)\to \bigoplus_{m\geq 0} I^m$, which corresponds to a closed immersion of their Projs by the general properties of that construction.
2) Every algebraic geometry book which covers blowing up should have a proof. For instance, Griffiths and Harris pg 184, Stacks 02OS, or this MSE question for a low-dimensional example (which generalizes).
3) This is just dualizing the statement of 2). Saying "$E$ corresponds to $\mathcal{O}(-1)$" means that $\mathcal{O}(E)\cong\mathcal{O}(-1)$, and dualizing gives $\mathcal{O}(-E)\cong\mathcal{O}(1)$ as requested.
4) Serre vanishing is not actually used in the proof: it's only meant to point out that the claim $\mathcal{O}_{\widetilde{X}}(-nE)\cong I_Y^n$ holds for any $X,Y$ once $n\gg 0$. For the specific situation of the proof, we are able to use the argument involving the exact sequence from the (now doubly) linked post to show this for $n\geq 1$ directly.
5) You've missed a $(n)$ here: the correct statement should be that global sections of $\pi_*\mathcal{O}_{\Bbb P(A^r)}(n)$ are exactly $\operatorname{Sym}^n(A^r)$.
Both of these claims follow from the property that for nice rings $R$, the sheaf $\mathcal{O}(n)$ on $\operatorname{Proj} R$ has global sections exactly $R_n$, the degree-$n$ portion of $R$. See for instance the discussion in Stacks 01QG.
In the first case, the ring $R$ is $\operatorname{Sym}(A^r)$, with graded components $\operatorname{Sym}^n(A^r)$, and in the second, the ring is $\bigoplus_{m\geq 0} I^m$ with graded component $I^n$, and we use the isomorphism $\mathcal{O}_{\widetilde{X}}(n)\cong\mathcal{O}_{\widetilde{X}}(-nE)$.