1. Yes, that has always been the option for private play and modding in general. Just make sure to not peer-2-peer transfer a modified, copyrighted work, as the rules qualify that as the same thing, not including if someone you thought you knew leaked it online and it all came back to you. To block private modding would be to block the inspiration of the modding community itself, which I cannot force myself to do.
2. Look on Steam. Active every day just like I am. I'm only on TCF for The Island Roleplay and checking alerts currently, but I'm available via Steam almost every day. The forums have never been a good place to contact the team, but rather through Steam's IM service.
3. The testers of the mod include around nine people selected to test the beta, in-progress versions of the mod. Not going to name names, but they are there and can present themselves if they so want to.
4. It isn't the team that would take this to a real world court, Sushi, but rather the ones we got several of the sprites from. You should always assume maximum guard around copyrights, else you'll find yourself knee deep in trouble, as you never know who is going to sue and who isn't anymore. Still, the entire team and spriters involved will get the work took down from the official forums if it is used. Moderators and staff here have a policy of not breaking copyright, and we've been through a few instances before in which that was invoked.
5. A TerrariaModloader version is in the works, but it may take some time to fully produce a working version. Team's been using Source and Prism, so it is a bit of a change from the standard pace...which is why I offered you the team slot to help accelerate things in that department.
Need to know whether you would want to or not, Sushi. If you do, add my Steam account and tell me personally. The account name is "Bullseye55" without the quotation marks. Someone like you really could help in the department we've been lacking in, I feel.