Buying/selling upgrades on eBay has been discussed here many times. A search would reveal that it is not encouraged at all by most FT members.

1. It is not illegal by law, but it buying & selling upgrades are a violation of MP rules and they can suspend your MP account and take all status and/or miles from you. They can do pretty much anything they want with your account in fact. If you are "found out" at the airport, they may demand that you pay the full fare for the upgraded cabin.
2. I would strongly discourage you from using eBay. I would also advise you that if your main purpose here is to use the CC that you are missing out on a whole lot more. Stay and contribute and you will discover a very fun and knowledgeable community.
3. Almost 0% on both p.s. & EWR flights.
4. Yes