See here for details of all 3 plans http://store.wordpress.com/bundles/
1. Yes. The premium upgrade includes a No-Ads upgrade.
2. We can all have favicons (blavatars) - no upgrade is required.
3. Not allowed - it's a Terms of Service violation
4. See here for the details and limitataions re: the annually renewable custom and CSS editing which is also included:
Custom design - Frequently Asked Questions
5. See my answer to 4.
Note that the free plan and the Premium plan do not allow you to upload your own themes or plugins. WordPress.com blogs cannot be equipped for eCommerce transactions unless they have the Business upgrade. http://en.forums.wordpress.com/topic/ecommerce-is-now-available-on-wordpresscom?replies=1
If you need a site that requires a custom theme or plugins — e.g., if you want to be able to sell things directly from your site, or if you want to install discussion forums — a self-hosted WordPress site might be right for you. WordPress.org offers free software that you can install on a web server. You can upload and install themes and plugins, run ads, and edit the database. Learn about the differences here. http://support.wordpress.com/com-vs-org/