Gaurdian,
I don't think it's too early to start thinking about residency application. I wish I had.
Applying to residency is a lot less stressful than med school apps because you will get a residency in some area no matter what. That being said, it is still stressful, especially if you want to enter a competitive field like radiology, ENT, ortho, ER, etc. Anywhere from 10-25% of people applying to these fields from US Med Schools do not get them and must do something else or try again. If you want internal medicine, peds, surgery, and most other fields, you will find a spot. The only stress is finding a good one and one that is right for you. This is academic for some and community for others. Although it is extremely variable, the general rule seems to be that people who want to do general private practice choose community programs (most of which are easier to get into than academic) and those who are thinking of academic medicine, research, and subspecialty enter university programs. Again, this doesn't mean the opposite doesn't happen.
As for what programs look for, grades (especially 3rd year), USMLE (mostly Step I but some want Step II), letters of recommendation, research (if you want academic programs), and the interview are the factors. Each specialty and program has different emphasis, but many competitive programs use USMLE I as a screening tool so study your ass off for it.
That's about it from me. I'm a fourth year medical student planning on going into radiology and am bitter because it all of the sudden got really competitive in the past 3 years. Anyway, if you have other specific questions, post them and I'll try to answer.