The only way I have seen lyrics/singing in screenplays is as follows:
Craig steps up to the microphone.
Craig
(singing)
She put nine hundred dollars / on the
fifth horse in the sixth race / I think his
name is Chips Ahoy...
He gestures at the crowd and drinks from a bottle of Jack Daniels.
Craig
(singing)
Came in six lengths ahead / spent the
whole next week gettin high / at first I
thought that she hit / on some tip that
she got from some other boy / we were
overjoyed...
...and so on. I would imagine most action is left out until there is a location and choreographer (if its a choregraphed dance-type piece). Otherwise, (or if you are choreographing it) I would just write it like a normal action scene - get the point across but dont dwell too much on the details of the actions unless they are uber important to the scene.
Hope this helps and though this is the way Ive seen and used singing, Im sure its done plenty of other ways too.
I use Verdana with the font size of 10. Under the character I use a parenthetical saying something like (singing) or (singing slowly). After the singing is done I switch back to Courier.
If it is a musical, and you have a Gene Kelly scene, just do it as an average scene noting things like swinging on a lamp post, or dancing up a wall. The particuler swirls, dips, kicks, would be done on a choreographer's breakdown. Same with lyrics.
For musicals the format is totally different from standard screenplays FYI. I am currently working on one with a few friends of mine. Progressing very very slowly. haha.
In screenplays you want to use the character name (sings) <<same area where you would place a (V.O) or what-have-you>>. And italicize the lyrics to signify the difference between lyrics and dialog.