1. Gnutella works the way that you ask one of those connections and it passes the question on. You are connected to far more than you see. The maximum number of hosts you reach is for a good part limited by the problem that when everyone in the network asks one question per hour and that question reaches everyone (lets assume it reaches a million people), everyone has to cope with a number of questions per hour equal to the number of people in th network. one million questions per hour is about 300 questions every second, and I assume you do want your bandwidth for other things than just being connected to the network.
2. LimeWire can download from just one source, but chances are someone already does or the source has simply gone offline again.
Busy means: Too many other people already download from me.
Need more sources means: The host has likely gone offline again.
Queued means: There are othe rpeople in line before you, but you'll get the file.
You can get more information about the network LimeWire uses here:
http://gnufu.net - Gnutella For Users