The first sentence of this card’s text means that monsters such as
"Beastking of the Swamps" cannot be used as a substitute for one of the required Fusion Material Monsters. You CAN use the effect of
"Magical Scientist" or
"Summoner of Illusions" to Special Summon this card like any other Fusion Monster.
You can only use this card’s effect to negate Normal Spell Cards, not Quick-Play, Equip, Continuous, Field, or Ritual Spell Cards. This effect is a Multi-Trigger Effect, so it is Spell Speed 2 and may be activated during the opponent’s turn.
This card’s effect only negates the effect of a Spell Card when it is activated, not the activation. So if your opponent activates
"Swords of Revealing Light" and you activate the effect of this card to negate it, it will remain meaninglessly on the field for 3 turns. Its effect will remain negated for all 3 turns even if
"Dark Balter the Terrible" is later destroyed.
This card’s effect to negate the effect of Effect Monsters that it destroys as a result of battle is a separate effect from the other one; you do not pay Life Points to activate it. This effect works the same as the effect of
"Dark Ruler Ha Des"; see that card’s rulings for more details.