I don't have it all fully figured out, but I've got the basics ... so let's try.

Yes - you certainly can make it so that each blogger can post only in their own blog. To do that means to understand the permissions system. Each blogger is a member of a group, so you have to think about "is this thing because of the blogger's permissions or the group's permissions". So let's pretend you have 5 bloggers and 6 blogs. No one gets to post in blog #1, so we'll call them bloggers 2 through 6 and blogs 2 through 6. You put all the bloggers in a group called, oh I dunno ... "bloggers". Now you go to the Blog Settings tab and select blog #2. You select the Users Permissions subtab, and make blogger #2 have all the permissions you deem appropriate, and save it. Now only blogger #2 is a member and can post? Better look at the Group Permissions tab first! If the group called "bloggers" is considered a member of that blog then (I THINK) all members of that group will be allowed in there. "Don't give group permissions on blogs" might be the best way to get where you want to go. The media permissions are a bit different, but are still controlled by working with User permissions and Group permissions.

Since you have a test account to work with it'll be in your best interests to set stuff as The Admin, log out, then log in as your test account and see what you can and can't do. Eventually it'll all make sense, or at least you'll figure out what settings work for you. Sorry I can't be more clearer, but ...

I think this is right information. I'm not sure though because mostly I do my own blogging. I haven't had multiple bloggers actively blogging since the 091 version.