It means when life presents you with difficult or sour situations (the lemons), you should make the best of it and turn it into something positive (lemonade). For example, if you lose your job (a lemon), instead of being depressed, you could use the time to learn new skills and start a new business (make lemonade).
Sure. If you get sick and can't go to work for a while (the lemons), you could use that time at home to read books, learn a new language or start a new hobby (make lemonade).
You could start by imagining a character facing a difficult situation. Maybe they lose their job or have a relationship problem. Then show how they turn it around and make the best of it, just like making lemonade from lemons.
You could have a story where a character faces a series of challenges but uses them to create something positive, like starting a successful lemonade stand business.
The Lemonade War is indeed realistic fiction. It presents scenarios and conflicts that are plausible and could potentially happen in the real world, giving it that realistic touch.
It's hard to say for sure. If the lemonade is used to illustrate a moral or lesson in a fictional tale, it's fiction. But if it's discussed in a documentary or real-life account, then it's non-fiction.