To pay the fees you can use a check, a money order, or the credit card using the form G-1450,
Authorization for Credit Card Transactions. The
N-400 fees are the only ones that can be paid with credit card. In case you choose one of the first two payment methods, the payment will be done to "Department of Homeland Security."
The fees are not refundable in any case (whether you retire your application or the application is denied). Hence, make sure you are eligible to apply for naturalization, fill everything properly, and send all necessary documents.
Back to pictures: they have to be passport style, click here for more details on that; and for more information from the naturalization instructions, check this pdf and go to page 3.
The pictures can be taken at home or at Walmart or CVS or any other places. I went to CVS and flipped out with the bad quality and crazy prize: $12 for a picture with vertical illumination that causes shades under your eyes and in all the bad places. I later went and repeated them at the AAA store, and was a bit more satisfied, still same prize though. Insane for 2 pictures, if you ask me.
Well, I hope this is helpful, good luck!