1. Client-side. TNet's server doesn't run Unity, nor does it know/care anything about what you're doing on the client side. Clients send messages to other clients through the server.
2. Thousands if you're smart about it. The most I've seen was when I launched Windward. I had over 300 players connected to my server that was running on my dev computer (same one I was using to develop) launched in debugging mode via Visual Studio on a regular household broadband connection and its memory usage was ~250 MB with bandwidth usage of about 1.8 megabytes per second (of course this will vary depending on your game and how much data you will send). CPU usage was about 2-4%.
3. I never advise making MMOs. It's like setting out to make the next Minecraft. While you could do it in theory, the chances of you actually succeeding are slim. MMOs require an absurd amount of security / anti-cheating / anti-hacking logic on the server side, especially when you consider having thousands of concurrent clients, let alone hundreds of thousands like in World of Warcraft. Could you do it using TNet? Sure. But to do it right you can expect to add quite a bit of additional security to the server itself if you plan on doing it right.
The word "MMO" in general is a very loose term these days. Some called Windward an MMO because of the hundreds of concurrent players I've had playing it on the same server -- but is it? I wouldn't call it that.
