3 - Windows 7 works fine on dual monitor with wow, I would go with just the 1 card as advised above. I use a Nvidia 9800 which is just an update to the 8800 and have no issues running 5 instances on two monitors. I have the 24" running the main at 1900x1200 and on the 22" I have the other 4 running in a 2x2 setup.
4 - Use 1 video card. The 8800 runs hot so I would recommend that if your manufacurer has a utility that allows you to control fan speeds on the card you install it and increase the fan speed so you don't take a fps hit because the card is overheating.
5 - Raid 0 but make sure you regularly backup whats important
Definately upgrade to 8Gb memory. Windows 7 takes a 1gb off the top not doing anything. Your wow instances will take 300-500mb each so you'll eat up that 4gb quick. Make sure you go x64 so you can support that much memory.
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