BuddyPress.org

It makes sense to me to give sub-blog owners a few templates, or just one. Really, I feel like too many templates will confuse the community, creating a lack of cohesiveness. Maybe I can have a few color schemes of the same template. Can my users upload templates? Should they be able to?

No, only you can. You’ll need to upload them to /wp-content/themes/.

I would like all activity to be presented on the main blog page. Basically, if anyone creates a sub-blog post, I would like that to be presented on the main page. Is that what the “all activity” widget does?

Yes.

I set things so that “blog owners” or “sub-blog owners” can’t install plugins, and I would like a nice, safe set of plugins and widgets that they can use without causing any damage. What about that WP plugin installer feature? Will someone gain access to it and break things?

You (as the admin) can upload plugins and widgets either via FTP (or similar) or via the Browser/Installer feature. You can also make plugins run on every site by putting them into the /wp-content/mu-plugins/ folder. The end user can activate or deactivate the plugins, but with the default user permissions, they don’t have access to the Browser/Installer page (I have just tested this).