A3: Nobody knows, because not all participants add their names to a membership list, and membership lists are almost always out of date. You can find out which projects' main pages are being watched by the most users at Wikipedia:Database reports/WikiProject watchers.
Q4: Which WikiProject has tagged the most articles as being within their scope?
A4:WikiProject Biography has tagged about 1.29 million articles, making it more than three times the size of the second largest WikiProject. About ten groups have tagged more than 100,000 articles. You can see a list of projects and the number of articles they have assessed here.
Q5: Who gets to decide whether a WikiProject is permitted to tag an article?
A5: That is the exclusive right of the participants of the WikiProject. Editors at an article may neither force the group to tag an article nor refuse to permit them to tag an article. See WP:PROJGUIDE#OWN.
Q6: I think a couple of WikiProjects should be merged. Is that okay?
A6: You must ask the people who belong to those groups, even if the groups appear to be inactive. It's okay for different groups of people to be working on similar articles. WikiProjects are people, not lists of articles. If you identify and explain clear, practical benefits of a merger to all of the affected groups, they are likely to agree to combining into a larger group. However, if they object, then you may not merge the pages. For less-active groups, you may need to wait a month or more to make sure that no one objects.
A7: No, there are no requirements. However, new WikiProjects, especially new groups that are proposed by new editors, rarely remain active for longer than a few months unless there are at least six or eight active editors involved at the time of creation.