Ok not sure why you talk about cartesian coordinates? A manifold is something that locally looks like eucidean space, is that wat you meen?
It is important to understandt that a manifold can be many crazy structures, such as fx. some collection of operators. So what would we meen by a operator being differential? We do not have some apparent notion of it, but we know what diff meens in euclidean space, so by requiring that or charts overlap smooth (you know what this meens?), we can thínk of every function from our manifold to fx R, as a map from R^n to R (assuming n dim manifold), where we know what diff meens.
So making something into a diff manifold is to give it a struture so that we locally can use what we know from euclidean space, which has a norm, and a nice topology and so on. But because it only locally looks like euclidean a lot of strange things can happen, which is what you study in manifold theory.
So to return to your first question, when thinking about the cirkel, you need to make charts that goes from S into R, by chart we meen that it need to be a homeomorphism from a open set of S to R. It is important to note that even though you can draw the circle in R^2, diff manifold does not meen that your chart
f: S subset of R^2-> R
is differential, but that all charts you construct must overlap smooth, which is very different (do you understand this differens?).
I understand why it seems like you already have coordinates because you construct the chart from thinking of the circle lying in R^2 and then making fx stereographic projection.
Maybe it who be a good exercise to try to think of the circle as the quotient space R/2pi*Z, and try to make charts to this. Or trying a more difficult manifold (it can help to take something more dificult because you don't place it R^n as easily), you could try to make the space of rotation in R^3 into a manifold.
that is you could represent a rotation by R(phi,n) where n is a unit vector (the rotation axis) and phi is the rotation angle.
http://en.wikipedia.org/wiki/Rotation_group
you need to make some clever maps to make them continous, if you give this space the induced topology from the operator norm
http://en.wikipedia.org/wiki/Operator_norm
on reason is that this space is isomorph to the closed unit ball in R^3, where you take oposite point on the boundary to be eqievalent, so you could try to start with making the space of closed unit ball where oposite points are equivalent to a manifold, then you will see that even though it is easy so picture it in R^3, the open sets are not like the open sets in the normal closed unit ball.
In fact you can't make the closed unit ball to a manifold (because it is closed), but this weirs costruction you can.
I stop now, it is a big subject so just keep reading and keep making exercises they will give you a feeling for it eventually