1) You can simply use OpenGL commands in LE, like glColor4f(0,1,0,0.5); and glVertex3f(100,100,0);. You need to #include "GL/glut.h".
2) It looks nice, but it's just a flat plane. But you can dive also. It's possible to make your own waves though, by replacing the default flat plane with an procedurally animated mesh.
3) Terrain LOD is done automatically. For models you can have up to 9 LOD levels, and you can adjust the LOD distances.
4) You don't really need static light maps, but you can use PureLight, it has native support for LE.
5) Framework is just a ready built-in class which does lots of things you can also do manually using worlds and cameras. For example for simple mirror and realtime map rendering, it's often better to use manual world rendering, because you don't need all the post-effects in those small render buffers.
6) No, but you only win: maximum speed, minimum compile times (using Code::Blocks+MinGW), maximum 3rd party library support, maximum respect from customers and other programmers, maximum fun with programming
7) Possibly 2011Q4
8) Possibly more than 0, and less than 1000.
9) Yeah, but you can also mix pre-baked materials and dynamic lights. Pre-baked AO looks always good, but realtime AO is good too.