1. Upload vs Export
Upload is used to send the gallery directly from Lightroom to you're own website. It uses Lightroom's builtin FTP client. Export creates a folder on your computer that contains all the files and HTML/Flash pages associated with the gallery. You then use your own FTP client application to upload the folder and contents to your website. In both cases it's assumed that you have a website and have access to the server.
2. You haven't mentioned which version of Lightroom you're using, but the limit to the number of photos was removed in version 5 or possibly even version 4. I have no idea what the maximum size might be., but I have a non public gallery with 700 photos and it's just under 60MB in size. Obviously, the amount of space you have access to will be determined by the web service provider or host you lease from.
3. Where do I find these answers?
A good place to start is the Lightroom Help documents (see Help menu) for Lightroom specific questions. Other questions relating to websites in general can be found using Google. This page might give you an idea as to how to create your own website How to Make / Create a Website: The Beginner's A-Z Guide to Starting a Website (thesitewizard.com)
1. As Ian previously said plus I use Export to disk option for larger galleries (500 pics+) since it is easier then to upload them to the web server using (instead of Lightroom's internal FTP client) some external FTP client of your choice (like Filezilla for instance) that can upload them faster using multiple FTP connection threads at once
2. Your web browser memory/cpu is the limit but it is quite high - I had no problems with exporting, uploading and using web galleries with 3000+ pics in one gallery.
There are some free hosting services so in general you doesn't have to pay for the hosting of your web gallery.