Yes you can customize the categories and change the labels through the language pack or through code modification.
My 1st question is - Can I customize the categories, such as "featured listings"... can I change the label from "featured listings" to Tracey's listings?
Yes possible though will may involve some customization. There are areas in the single ad to put some banners including the header.
2nd question, can I retain control of certain areas on the site? Such as the "featured listings" block and use this area only for my own ads? I realize that I would have control over the blog area as well as banner ad areas.
This can be done through custom fields and custom forms.
3rd question - (I think I read about this in one of the posts) Am I able to create categories such as State, county, city... and then have the ability to expand the options by adding additional states, counties, cities as I expand my reach?
You can can embed you tube video in the add by turning on the html option. You can check the demo page
http://demos.appthemes.com/?theme=classipress to get yourself acquainted with Classipress features.
4th question - I saw where video is an option to add to the adds... is there a specific player used in the script? Are YouTube videos able to be used within the ads? Also is there a YouTube widget or area where a YouTube widget can be placed on the site to display a YouTube channel from me, like my blog area? Thanks!