a. Does it have to do with the Output to Swatches checkbox that is under the Max # Colors input box
yes. You can find them in the Swatches panel.
b. I use Selective Color all the time in Ps-- I love the control one has over specific colors rather than changing the whole deal like in the Hue Adjustment-- is there an equivalent tool in Ai to Ps' Selective Color?
Try Edit > Edit colors > Color balance
or: Edit > Edit colors > Recolor Art
c. Can I make a pallette of say hot pink, turquoise, and chartreause and force the Live Trace function to create a vectorized image using these 3 colors even though the source image is a bland greyish brown shark?
Create a swatch library and load it. Then it should appear in the trace dialog box for you to choose from.