I believe it is a model. It falls into the same (or at least a similar) category as such things as Force Lightning, Force Aura and a couple of other things. I know you can change the texture for the lightning by just making a new tga, but I don't think the particle effects can be changed so simply.
Yeah, don't expect a great overhaul or anything. The system works, but it's not efficient in any sense of the word.
You can have Higher DC throws (I think), and for that matter you can adjust any skill/attribute/ability/throw to any numerical value you see fit, but you can't change core engine rules. No more saving throw types. Other damage types might be possible, but the effects the damage type has on a character are going to need to be scripted.
New Feats are possible, they just will have to be passive.
Just 2.
Not unless you give them a bunch of XP points at the beginning of the game and then force the player to level up.
No. You can't get them to even show up in the GUI.
No, I do not believe so.