Hari Om. Pranams.
Ishvara created the world of objects (Jagat) from his own Self (same way as our mind creates dream world of mountains, roads, trains, sky etc. from itself). Ishvara then entered into the world as an experiencer(Jiva) (same way as our mind becomes 'dreamer' to experience 'dream objects'). Jiva(deluded Ishvara) looks outward through prism of his mind and sees Jagat, similar to how a dreamer sees the dream world.
So now we have a threefold division of Jiva-Jagat-Ishvara. This plurality can be summed up as 5 differences(bhedas) -
Jiva-Jagat (Difference between an individual experiencer and world of objects)
Jiva-Jiva (Difference between one individual experiencer and another)
Jagat-Jagat (Difference between different objects of the world)
Jiva-Ishvaa (Difference between an individual experiencer and the creator)
Jagata-Ishvara (Difference between world of objects and the creator)
It is the creator who is projecting 'inner world of thoughts'(jiva) and 'outward world of objects'(jagat) from 'His own Self'. He is the material and efficient cause like mind is the material and essential cause of a dream. Just like 'dream objects' and 'dreamer' is nothing but our own mind, so too all jivas and jagat is essentially Ishvara.
If a dreamer looks outside he sees dream world and gets afflicted by it (especially if it is a nightmare). Same way we too get afflicted by the world. If a dreamer turns inwards and gives up his identification with dream body, then the whole dream will fold away. He will understand that dream world and dreamer was projection of his mind. Similarly, we too need to understand that everything that we hear, touch, see, taste, smell is Ishvara. The mind that we consider our own is also part of this world (we know our thoughts as 'this'). It is also Ishvara. Pujya Guruji says - Cultivate the thought: “Divinity alone is present everywhere!” Feel the presence of God everywhere......
Now if we think one level deeper - who is Ishvara? He is the creator. Creator of what? Creator of 'Jagat' and 'jivas'. However if 'Jagat' and 'Jivas' is Ishvara, then where is the creation? (creation was mithya like a dream). Just like we don't call our mind 'creator of dreams', without 'upadhi of creation' we don't use the name Ishvara (Just like a woman won't be called a 'mother' if she hasn't given birth to a child). In His essential nature Ishvara is Brahman(our own Self).
Therefore Bhagvan Adi Shankara is telling us in these two instructions that "Realise and " See" the All- pervading Self every where. Recognise that the finite world is a Projection of the Self."
I don't know if I answered your question or not. I tried to the best of my knowledge. Please correct and suggest as needed.
I did not understand your answer for the second practical question i.e the 5 bhedas that you have listed. Kindly explain them for my better understanding.