to answer all your questions, (deep breath)
1. Yes, they can. Weblog templates can be created and then uploaded to a certain directory. Once they are added by the admin, they'll become selectable by normal users. For now, I only have one done and I plan to make a few more.
On the other hand, the administrators can give special priviledges to give certain users FULL control over the html in their weblog. Basically, they can show whatever they want.
2. It's already easy enough, since the posting system and the weblog control panel are similar to phpbb's posting system and it profile control panel.
3. I'm not using FetchAll. This mod is almost completely written from scratch.
4. Not yet. Sometime in the future I'll code a bit for this.
5. I plan to allow uploading of pictures for weblog entries only (and even so, up to a maximum total file size set by an administrator)
6. No it doesn't have it as I'm not quite sure how to work it out in php. I do plan to do it someday as trackback is becoming useful nowadays.
7. Refering to my answer to #1, any amount of "cool stuff" can be included if the weblog owner (with full html rights) wishes, or if the weblog template has it built in.
8. Anything that you can type into a phpbb forum can be posted. Which means you should be able to post chinese characers
9. Again, that's all at the discretion of the weblog template designer (it's not controllable by users even with full html rights - that's only for their main page)
I should start a new topic, its essentially a new mod.