Anna: Your teacher is right. Technically, the references should be single spaced. The MLA style format is so much for most students to absorb and I have seen it both ways so I try to make it easy for you guys by just giving you the general rule rather than the exception . . . In other words, yes, everything but the references should be double-spaced but I won't be so strict about it.
Anna and Ryo: you guys ask the great questions that are on everyone's minds! For detailed info on how to use either direct (exact words with quotation marks and reference citation) or indirect (someone's distinct point of view or unique bit of information, put in your own words, with reference citation) quotations, see pages 127-129 in your IE Core and IE Writing text. If you can support your ideas by properly quoting from the book or other sources in your book report, that will certainly add to the credibility of your literary analysis.