Myself Manit Dani, Guitarist / composer / lyricist of SOUL the duo.
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Installing nylon strings on a guitar designed for steel strings wouldn't hurt anything but you probably won't be satisfied with the results. The nylon strings won't pull hard enough on the front of the guitar to produce a good sound, the intonation...
Vibrato is small and rapid variations in the pitch of a played note. It's achieved on the guitar by vibrating the finger playing the particular note. You will this technique used by violinists especially.