I was in a similar position during the time of the Chemistry pro tem moderator appointments. I clearly stated my unease with not having more than an advanced high-school level understanding of Chemistry, and I was told (repeatedly) that it wouldn't matter much.
As far as my experience moderating Chem goes, not being familiar with the ins and outs of Chem doesn't harm my effectiveness as a moderator. It's never really needed. In cases where there's a question that I don't understand at all and have no clue what to do with (happened once or twice), I just ask the other two mods. But generally, even if I don't know enough chemistry to understand the question fully, I can still determine whether or not it's a good fit for the site. The other moderator tasks (flagging, etc) require even less knowledge of the topic, so no troubles there.
But, Chemistry is a much smaller site. So there may be a need to have a good enough level of Physics to be effective as a moderator here. Since the moderators here don't unilaterally close questions as much, not much Physics knowledge is required on the "closing" front. While resolving content disputes, one may need to have an expert-level understanding of the topic involved. The few content disputes I've seen here that require mod attention were of a pretty esoteric topic--there's a low probability any moderator would be proficient in that zone. So, my conclusion is still that we don't need experts to be moderators--just people familiar enough with the topic.
What's more important is that the users are familiar with the site policies and have been around for a while.
Should they be an expert in atleast one of the fields in Physics (could be determined easily by reputation & badges)
Answered above. Also, rep/badges!=expertise, rep is a rough measure of community trust and participation. Which is actually what I feel we need in moderators -- but this doesn't mean that you should vote by rep (Remember, rep is a rough measure).
Could a 300 rep. user (who helps the community through meta) participate & be elected as a mod. ?
Iffy. If the user is active on meta, that's pretty good. If the user has been active (>2k) on some other sites (not including SO), then the user is probably knowledgeable of SE policies. So, a 300 rep user can make a good mod, as long as s/he is familiar enough with the SE model and policies. Though <1k rep generally does mean that the user is probably not that familiar with the local site rules and community.
Why does "moderator attention flags", "participation in meta" (along with its Q&A votes), etc. count during an election? (Do they sort you by ranking ?)
For the purposes of sorting:no. During nomination, the users are sorted by "time nominated", most recent at the top. During the next two phases, the posts are sorted randomly on reload.
These stats are there to help voters rank the nominees at a glance. Meta participation and flags show the user's participation in community building and cleanup, which is pretty essential for a mod. A more robust version of these stats can be found here