Well let me answer your questions :
First let me point out that there are ten races in all. I won't name all of them but a guide by Eldritch to them can be found here
http://eldritch05.tripod.com/eoslog/(I like the whole log Eldritch makes, pretty cool). Some race have female/male versions other don't.
1 - Well, depending on the races, size will be different, at this point humains around 24 high. As for orcs they will be 32, dwarf 16, faeries a little less the 16, etc. (All 16 width at this point)
2 - We are at this point making 4 direction 5 frame each animation so that the movements are fluid. As for 'What walkscript should it use? Any special frames?' I will let Eldritch tell you about it. Althought each race will have one ghost npc to have when a character as fallen independant of the class of the fallen char.
3 - I have been working on blackbordered npc at this moment, I agree with the whole using different style will screw the feel of the game. I will post an example as soon as I'm done with it. (I kinda never did a full animated char ever, so I'm having trouble on some part I never did before)
4 - Well between most races, it's not to hard to tell them apart by their very different looks. We got lizards dude, undead, etc. But for class, you can do a template that will make it easier to do others. Hair color change is an easy way to give individuality, so are other things. It all depends how much variation you put. At this point I'm thinking to do different hair does for each class/sexe for the humains(female fighter black hair ponytails, female paladin fighter mid short blond hair). Ok lol, i'm not really answering the question, let me put it this way, body structures can obviously have template, where your variation will go is probably in the accessories. This question is hard since it depends on a degree, and i can't really put a value on the amount we want.
5 - Well good enough so that people won't be distracted by an ugly sprite they can insult. lol Or good enough for Eldritch if you like. :p
And Thank you for the well thought questions.