The difference between choosing to fund a Traditional IRA (or SIMPLE IRA, which is just a Traditional IRA that is offered by your employer in lieu of a 401(k)) is whether your marginal tax rate now is higher or lower then you expect it to be at retirement. If you think your tax rate now is higher, then a Traditional IRA would have a larger impact (higher tax deduction now, can invest more cash). If your tax rate at retirement will be higher, then a Roth would be better (pay lower tax now, avoid higher tax at retirement).
Obviously you can't know that for certain unless you're at the max bracket now (even then it's possible that tax rate changes could put you in a higher bracket) but you're mostly optimizing at that point - it's not like either choice will cost you money. Some prefer to invest in both to provide a bit of a "hedge" against tax bracket changes, which is fine, but if you're in a very high bracket now (i.e. the peak of your earning potential) then a Traditional is most likely the best option, assuming you invest the tax savings rather than spending it, otherwise a Roth is a better choice.
Gains and dividends have no tax impact in either scenario - you are only taxed when you take money out regardless of how that money got there (via contributions, capital gains, or dividends/interest).
The choice of investments within an IRA should be determined by the level of risk you can tolerate and the expected total (price + dividend) return that you expect. Higher return investments generally come with higher risk (larger chance that you'll lose money but possibility of large gains).
One generally accepted rule is not to invest in Government or Municipal bonds within an IRA, since you don't get to take advantage of the tax breaks (your gains are taxed when you withdraw) and the returns are generally smaller than equivalent taxable bonds.