1) Yes
2) Don't know for sure.
3) "Fragmentation"*
4) Unknown. *buntu, Mint, XandrOS, Linspire, Fedora are all designed to address mass market.

*Note: By Fragmentation what I'm referring to is that linux's biggest strength, is also it's biggest weakness: options. When dealing with linux there is simply a plethora of options to choose from because everyone wants and likes things a little different. Well, with linux this is perfectly achievable by customizing everything up to and including creating your own full distribution. With Windows, not so much - You get what Microsoft gives you and then maybe get to play with the UI a little bit to make it "look" pretty.

Linux has standards; but not everyone follows them. Linux has many different package management formats, meaning that just because a piece of software was written for linux - it may not have been written for your linux, and therefore not easily installable. There is sometimes software you can get to help convert other packages to your system, but these don't always work.

These types of problems tend to direct the mass market away from using it - people get the impression it's too difficult or half-asked. To some people (especially new people), linux can feel a lot like using a bunch of pre-XP software on newer windows, and having it not run in "compatibility" mode.

However, even having said all that, I still believe linux is more than ready at this point (using any of the above mentioned Distro's) to being a viable alternative to a large portion of the market. Some people have specific requirements that may not work in linux - but by and large the most common tasks and most common uses for computers work fine. (Web, email, IM's, basic (non-3D) gaming, etc).