I think Fine looks the most realistic for most applications. You can also use N scale ballast for HO, as it looks good too. If your budget is tight, medium will be cheaper in the long run as less is needed per foot, but the pieces are a little too large for HO.
The technique I've found works best for me is to use a small cup to sprinkle the ballast down the center of the track first. I then level this, mainly using my finger. Try to keep the ballast of the tops of the ties and off the web of the rail. If you have too much ballast in the middle, brush it over the rail to use on the outside. (this is why I do the middle first) Next, I sprinkle the ballast along the outside of the rails. Again I level it with my finger, gently tapping it down level with the ties. This usually leaves enough ballast to fill the area around the ends of the ties as well. If you are using elevated roadbed, like on cork, I find it useful to put white glue along the slopes to help the ballast follow the contour better. Painting the cork a colour similar to the ballast before ballasting can help hide any spots the ballast may come off of later.
I use a pump action sprayer to spray "wet-water" (water with a few drops of soap in it to break up the surface tension of the water so it flows better) or alcohol over the ballast to wet it down before applying the glue. Make sure the ballast is saturated, so the water penetrates all the way through. If not, you could end up with a layer of glued ballast over loose ballast. The top layer will be weak, and it is a mess, and ugly, if that top layer breaks! To glue the ballast, I use a mixture of 50/50 water and white glue. I drip it on using a glue bottle with an adjustable tip to control flow. If I get too much glue on the ties, I spray it all with "wet-water" again to dilute and rinse the glue off the ties.
I'm sure you'll have many other suggestions on how to lay ballast, I know I've seen it done many different ways at my club! Experiment and find what works best for you.