What does it mean when the titles in my library are in red? And in the bottom left corner of LW, what does it mean by Sharing 29/120 files? Am I only making 29 available somehow?

They're still "hashing" (once hashed, they show as black in the library, and the indicator will say 120/120). If you're a glutton for punishment, the refresh button on a shared folder causes all the shared files to be rehashed.

What does hashing entail and how long does it take? Is it a process that happens locally or out on the network somehow?

Locally--so the speed depends on your CPU. 10 GB/hr is likely.

The unique SHA-1 identifier is being calculated for the file, and the results are stored in the filurns.cache. Once done, it is reloaded on subsequent startups, so the process doesn't need to be repeated.

The hash guarantees that the file sent is the file received. If a corrupt file is hashed, that will guarantee a corrupt file is received. So, don't share corrupt files. If you do have a known file, you can use the Bitzi lookup features (right-click on a filename in the search results or the Library) for more info.