Drop that stem and get your bars set up probably, you're riding a bike, not reading a book in a chair!
Looks good! I recommend Speedplays since you can clip in from either side, the cleats are large and make it easy to clip in and out. Shoes: any good entry level Mavics or Shimano shoes are good for the money. If you're feeling rich, go buy some Sidi shoes with carbon soles. They'll last you years and will add bling to your rides.
Side note, I had the precursor to your bike (I actually still have it), they're prone to cracking at the joints. I can send you pics of mine but basically, watch the areas where tubes meet. They're considered normal by Trek but they can be scary. I shelfed my bike after the second repair and re-spray from Calfee and switched to my current Scott. Still ride the Trek with the kids but the cracks get noticed by people (it's painted white which makes them even more obvious)