Hi kitty, Personally I would leave it untreated and in the hope that birds would take to it more readily if its left natural. If you do wish to treat the wood to make it more durable, I'd go for something that states on the can, "harmless to pets and wildlife, low odoure"
As for the best time, the autumn is generally concidered best as it gives the box time to "weather in" before ealy spring when the birds start looking around for a suitable nesting site. put it up away from where cats can get to it if poss and face if somewhere between north to east to avoid it getting too hot in the mid-day sun. Good Luck Tbird+