depends...if it's clean you don't have to do anything. If it's greasy and dirty still, boil it a couple of hours in a solution of TSP. It stinks to do this, so boil it outside on the grill. Let it dry completely in the sun.
Bone can be stabilized commercially or on your own. (there a zillion threads on doing it yourself - do a search here)
It generally does not have to be stabilized but it will move with humidity changes, just not as much as wood. Sand it, drill it, shape it pretty much exactly like wood. It stinks when you grind it but you get (kinda) used to it.