Yes, 3/16" refers to the ID of the hose.
You should be able to "warm up" the end of the hose and it will fit. You might try HOT water. I have a heat gun that works like a charm.
ya 29cents a foot for non toxic stuff at princess auto(what i speak of i use for bottling so i dunno about long term contact effects). dunno where you are or what stores you have available but it shouldnt be too far off
Spend the cash on the 3/16 ID thick wall beverage tubing. It's worth it.
Your LHBS should have it, or you can get it from several of the suppliers that advertise here.
The thick walls help control foam, and it's designed for food grade use.