The instinct test is set up where there's a tunnel in the beginning and a path lined with bales leading to three tubes. One with the rat, one with litter & one empty. The dog does not have to go through the tunnel or climb on any bales in instinct. It only needs to indicate to you which tube has the rat, and you tell the judge which tube it is.
I would suggest before going to a trial, if possible, to find someone doing a workshop or intros. We always introduce the rat in a cage to dogs first, then put the rat in the tube and eventually add in the litter tube to teach a dog to discriminate between the two. It's a slow process getting the dog excited about the sight of the rat (which more dogs are) and pairing it with the smell of it in the tube (which is much less exciting to dogs). There's also a difference with dogs who like to hunt/chase by sight and dogs who hunt the unseen. Crossbone will chase a squirrel but he'd never dog a hole to look for a mole he smells. He failed at barn hunt.
If you don't have the opportunity to meet a rat ahead of time, it can be risky entering novice---but I do know people who have done it and had success. It really depends on the dog and you won't know what his reaction will be until you do it. Novice also adds in the element of searching for the tube, climbing on a bale and going through the tunnel--all of which could be overwhelming for a dogs first exposure to it all in a trial setting. Heck, I was teaching classes and it took the majority of dogs 2-3 times to actually know what they're supposed to be doing. Of course, you have the dog who takes to it immediately and is all about the rat or you have a dog like Crossbone who couldn't care less about it all.
I believe dogs run "naked" in all of the levels. The space is fenced in---if you're worried about him being off leash (some with x-pens, snow fencing or something similar).