As mentioned in the previous line, a majority of today’s rappers feed off of the materialistic and violent stereotypes attached to hip-hop. Reese then plays off the word “stereotype” itself, saying that these rappers' antics are “played out” like their music on the stereo, hence them being “the stereo type”.

A lot of today’s rappers feed off the success of others, even copying their styles, so Reese fittingly compares them to germs/parasites, continuing with the “bird flu” metaphor.

Since a lot of rappers today constantly brag about how “sick” and “fly” they are, Reese mocks them by taking those terms literally: sick + fly = bird flu, which is influenza caused by viruses adapted to birds.
http://en.wikipedia.org/wiki/Avian_influenza

Reese’s 16 and 32 bar verses will “murder” the competition, leaving them stiff as a stone.

Reese thinks so deeply that he’s always in control, even when life sends him up “shit’s creek” (bad things happen). Essentially, his deep mental capacity won’t allow him to be carried away by any bullshit life may throw at him.

Reese compares his writing to the power and finesse of Floyd Mayweather when he trains on the medicine bag

When Reese begins a new writing project, he “goes hard”, so to speak. He compares the spine of the notebook he writes in to a human spine, which he metaphorically “cracks” due to the force of his lyrics.

Not a reference to the Kanye West-affiliated rapper Rhymefest…

…just saying there’s a shitload of rhyming going on.

Reese is not a member of the Catholic church. It’s just a saying.

Shout out to the Roots on the beat:
http://www.youtube.com/watch?v=5UjxRCPHW30