Do I need to use spherical coordinates?
Equation already uses spherical coordinates. The only variable shown is r, which is a distance from the nucleus (actually from the mass center of the atom). Equation as listed looks to be
[tex]E\Psi_{nlm}=-\frac{\hbar^2}{2\mu}\frac{d^2 E \Psi_{nlm}}{dr^2} + VE\Psi_{nlm}[/tex]
which (as far as I can tell, quantum chemistry is not my forte) is not correct. Without some of the Es listed it would be probably correct only when you ignore angular part of the function. Could make sense, as you are asked to deal with l,m=0 cases only.
In the given equation, ψnlm cancels out on each side of the equation, this makes no sense.
It doesn't cancel out, second derivative of the function is not the same thing as the function itself.
Without knowing the context of the course it is hard to say what you are expected to do. Perhaps you need to solve the differential equation as given.