1 - By default maps are 128 blocks tall (thought you want to stay under since the lower layers have a couple of issues with the fog and shit), modding can change that. If you need to make something really tall you can just lay it flat on the ground so people can fly up (or climb some huge stairs) and look down at it I guess... though there's still a limit to that as well, depending on the person's draw distance... but even then there's a max limit, but it's way larger than most single-sprite works you see on youtube and stuff.
2 - Like, pre-made in minecraft or what? Pretty much most sprites from the SNES/Gen days on back are below 128x128x128.
3 - I think there's some mods and third-party tools for this, don't know any offhand.
4 - I'm not aware of any ways to do this. The only colored light sources are blue and orange, and those are weakly-colored, and they're just moonlight and torches. Not really usable IMO.
5 - Then choose something a shade darker.
You don't need to stick to colored wool for things, there's other types of blocks with varying colors... like obsidian is a dark purple, grass is a different shade of green from above, there's clay and bricks, and more.
6 - Yes. For something twice as big, each pixel normally should be composed of four blocks in a square in minecraft.
