If you are using MySQL then you don't want MS SQL indexing so that's that one out of the equation

MYSQL indexing is really poor. The search results are obscure and inaccurate.

So INTERNAL is the best for fast searches giving the best results. Running nph-index.cgi then basically builds an index of you database.

NONINDEXED will just be slow(er).

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Do I have to run the script from shell? If so is the command "sh" & "name"?
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Yes but you would use perl not sh (sh is for shell scripts, nph-index.cgi is perl)

perl nph-index.cgi