Aquarium safe sillicone works fine, I've used it for rock decorations for several years without a problem. You should have a scalpel or box cutter handy to tidy up the overflowing bits before you put them in the tank, otherwise they will turn blue overtime - this may detract from the natural look.
The best thing I can suggest is to put the rocks in there without sticking them together - they can be pretty stable if you use your head. This way, over time, you will come to see the types of arrangements your fish like to live in and you like to look at - that's when you can stick them together. For inspiration, do a net search for biotopes and and rock aquariums.
A couple of months from now I plan on doing this:
http://www.reefcentral.com/forums/showthread.php?t=1300282 using sandstone pavers and rocks, with the foam used to stick them together. I won't be sticking them to the tank, so I will be minimising the foam. To enhance the look, I plan on cutting the foam to look like the stone and covering it with sand. I will also be using strategically placed pipes for artificial caves.
Also, this might interest you:
http://www.monsterfishkeepers.com/forums/showthread.php?t=57207
From experience, I think the best thing to do is do nothing beyond playing around with rock formations until you finally know what you want - this can take months as you will need to see them in the tank and see if they grow on you, and more importantly your fish. Try not to make too many large changes too soon, as you will upset the fish and risk damaging your tank.
Good luck
