The main graal servers are hosted on some tropical island that i cant recall the name of at the moment.. Ill get back to you when i remember the name. I do although remember its quite expensive to live there and thats where Unixmad stays..
3. I'm not sure, but servers can only take so many clients before they stop working. It all depends on the server specifications.
4. The limit can of course increase to two times its current size, but that requires upgrading the hardware, or improving the server software. Many problems arise from the limitations of the client. There are only so many players the client can render before it becomes laggy.
Thought this was quite funny; we are basically waiting for the servers to break until anyone does anything about it, and by that point Classic's online player count will be lower than UN's.