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1) No, there are no weapons with endless ammo.
2) You didn't tell your party composition. If you want strong ranged combat, include a ranger and a gadgeteer in your party. In my opinion, every party needs a fighter (but just one), since they are the best melee guys in the game.
3) This isn't a major issue. If your skills get really good, you'll do more damage with the same equipment. You can upgrade your equipment once you get to Arnika.
4) I've never tried playing this way, but I assume you can level twice without loss.
5) There is a safe in the monastery that contains several doses of resurrection powder. The ressurect spell is a fifth (sixth?) level divine school spell, so you won't get that until level 12 or so. You may find resurrection powder, scrolls or stones as random treasure at other places in the game.
I can't imagine trying to play this way. I enjoy the game too much to spend any of it on autopilot. I, like you, work eight hours a day, do other things most evenings, so I'm lucky to get two hours a night in. I make up for it on weekends.
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