I know how to set up the folder, but how do I get a template into the folder and what file format?
Shared Folders are in clause 7.5.3 of the user manual.
Scrivener’s native format is RTF.
And as noted in the user manual, this function is basically an auto-importer. The import part of that is identical to what happens when you drag a file into the binder from File Explorer, or use the menu command.
The limitations are almost the same as well. Folders won’t work, that’s the main difference, and as with normal import, you can’t import Scrivener projects into Scrivener projects for obvious reasons.
Otherwise, put whatever you want into there. Plain-text, RTF, DOCX, ODT, or even read-only files that are useful references you like to sometimes add, in PDF format, or boilerplate file types Scrivener itself doesn’t edit, but can host, like Scapple files.
Again, like Import, only text files work in Draft, but when you select anywhere outside of that, the whole template menu’s contents will be available.