I believe the *.PRZ files is an option. The idea is to take all the individual files and put them in a single file. Its like a zip file.
1) Is their any settings that needs to be changed in either software to make the integartion happen.
This integration should work for you. I would check with your reseller and they may be able to trouble shoot for you. Do you have the SolidCAM addin enabled in SolidWorks options?
2) Is their any conversion process to read *.SLDRT files in SolidCAM.
From inside SolidWorks with SolidCAM enabled, if you have the SolidWorks part open you can goto cam mode by under the SolidCAM pulldown menu "New Cam part (sim. wording). This will create the design part and put it in assembly mode for adding your operations etc.
If you have an existing part done you can goto the pulldown menu and open the previous cam part there