NM-B is not normally used to make extension cords. That said, for occasional use where it won't be dragged around a great deal, it will work. The main difference in the conductors themselves over SO type is the size of the individual wires that are bundled in each conductor. They are smaller, and hence more flexible in SO style. All this really means is that NM is stiffer, and after repeated flexing, copper work hardens and could break. Not good.
It doesn't really matter which wire you use for ground. Modern standards require (for single phase) 2 hots, 1 neutral, and 1 ground. In practice, and for many years, the neutral and ground were used together, and allowed on a 3 conductor cable. The only danger is where there is a breakout in the DUP for 120 VAC. Otherwise, in theory at least, the neutral never carries any current anyway, same as ground.