1)
http://civilization.wikia.com/wiki/Whipping_(Civ4) That fully explains the mechanics of whipping.
Strategically, you whip to avoid growth into unhappiness or unimproved tiles and to convert food into hammers. In the early game you will usually have a low happiness cap and more yield from food specials than you actually need.
Late game you whip to convert stored up population into hammers, and then keep whipping to get high production from small cities well below the happy cap. You want to do this when you get a military tech with a particularly good strength advantage before the target does.
2) Repercussion of more cities is more maintenance, directly (that you can see in the city screen) and indirectly (yearly cost of civics). Repercussions of settling up against your neighbours are a negative diplomatic hit ("Our close borders spark tensions") and a higher chance of being a war target.
3) Open borders are a must, the AI mapping your land means nothing. You dont give in to demands of AIs that are politically isolated or physically can't get to you. I mean, that varies. Sometimes a demand is too outrageous.
4) You should have almost no military, just enough for one garrison unit in each city and perhaps a party for capturing barb cities. Units cost maintenance over a certain number. You rely on not being randomly attacked, sometimes it doesnt work. You only build up an army when you have a window of opportunity, usually with Horse Archers, Elephants and Catapults, Trebuchets and Macemen, Cuirassiers, Cavalry and Airships, Cannons and Riflemen, Infantry, etc.