I'll take a stab at answering these, since... well, I'm the one who wrote the PSO server used here.
Elliander wrote:1.) I created a new character using a newly purchased copy of PSO since I cannot access my characters from 2003/2004 due to not knowing the old serial number and the old Dreamcast not working properly. Since I'm essentially new now, at what point should I consider playing online?
Any time is fine. Honestly, some people play almost exclusively online from the start, only doing the offline mode to unlock all the levels.
2.) I've read a few threads about characters being "hacked". How would this be possible if the characters are fully stored on the VMU? And what power does the private server operator have over the characters stored on the VMU?
Technically, the server could have a lot of power over what's on your VMU, in that the server can essentially send a packet to overwrite large portions of your character data (that's how the server-side emergency backups work, essentially). That said, Sylverant doesn't have any "hacks" on the server to boost stats or anything like that, so you don't have to worry about a non-vanilla experience if that is your conceern.
3.) What happens if I backup my save and restore at a different time (using DreamConn+ I can backup/restore protected saves) would the private server detect some kind of problem with my character?
As long as the backup is true, complete, and unmodified in any way, the server won't be able to detect any problems with your save. In fact, I highly recommend making regular backups in case your memory card corrupts or something like that.
4.) Would there be any issues with registration to and using a private server if I am using GDEMU? (obviouly I own a copy since I have a new serial number) or would it be in some way better to use my GDROM with the disc?
You can use a GDEMU just fine -- the server doesn't care about that. However, you will need a special version of the Sylverant PSO Patcher disc image if you intend to do so -- it doesn't normally support GDEMU (which is really something I should correct at some point). Some people prefer to use pre-modified images that eliminate the need to use the PSO patcher, but that is largely up to you and not necessarily something I recommend in any way.
5.) Can I take a character to more than one different private server without issue? And would there be any advantages in doing so? (i.e. Download Quests)
Sure, you can... But everything I'm saying here about server-related things only applies to Sylverant. There's really only one other option out there (SCHTSERV). I don't know if they have any special downloadable quests or whatnot these days or not.
6.) Would I need a separate CDI file for each private server I want to visit? I found one by IVES that seems to be patched to access the Sylverant PSO Server, so I am guessing that if there are other servers to play on I'd need a patch for those servers as well?
There are ways to use one image on multiple servers, especially if you have some way to serve your own DNS requests. That said, they do require additional work to set up.
7.) I have both a Broadband Adapter (LAN) and a Modem (LINE) with a DreamPi. Are there any advantages to playing with straight ethernet? And if I wanted to set up additional consoles in my home for family to play with me on (each with their own copy of PSO of course) is there a limit to how many devices I can handle?
The BBA will probably give you a more stable experience online with less chance of network hiccups. If you have both, I'd recommend using it for that reason alone.
The only restriction to multiple connections (at least with BBA -- I can't guarantee anything with DreamPi as I've never used it) is that only one copy of the game can be online with the same guild card number at a time on Sylverant. So, if they're all using the same serial number/access key, only one will be allowed online at a time assuming you register that key on the website.
8.) Would it be at all possible to create a small private server of my own specifically for LAN play? Are there any guides for something like that? (the basic idea being that in areas with less reliable internet access, I'd like to be able to play with others in my own home)
Sure, it's possible. There aren't any guides to doing so with Sylverant as it is not generally recommended by me to do so. However, there is an old version of SCHTSERV's software out there that you could easily do something like that with. I don't know if there are guides out there to do so though...
9.) Is there anything else I should know?
PSO is much more fun to play online than offline, in my humble opinion. Especially when you play with people from all over the world. It isn't really a game that I personally think is great to play in a LAN setup, but that's just my opinion. Also, keep regular backups of your character data -- especially if you have a good way to make full backups of the memory card file. If you have your serial number/access key registered on the website, you can use the automatic character backup system as well, but it really is more of an emergency recovery system than a full backup (not everything can be backed up by the server).