Hi Guest, I'll try my best to answer your questions but I'm not a mod.
1. I think if you keep the database the same but only have the cities/regions be different, by creating different categories for each city/region you could customize each category in the theme with a different look. Alternatively, using your thought above, you might be able to set up CP on different sites (maybe subdirs of the same site) and code it differently that way but you might need to get your hands dirty with the code or hire a coder. Maybe one of the mods can shed more light on that?
2. Yes this is a self hosted package. You have to have your basic website setup and running WordPress. You don't really need to know any HTML but do need to know how to install and set up WordPress and install a Theme. I can help with this part if it's something you need done, for a fee.
3. You can charge for your ads a couple of different ways, a flat fee per ad, a percentage per ad, but currently I don't believe there's a way to charge membership fees unless you incorporate a Plugin. The good thing about this theme is that because it's run on WordPress, you can implement just about any WordPress plugin.