Hey Tyler,
Thanks for the questions. I'll try my best to answer them
1) At the moment it uses Open Site Explorer (OSE) Free API to grab top 1000 links. Hopefully by early next week we will have support to pull up to 10,000 links from OSE if you have their Pro Account or Paid API. Future development includes adding ability to grab data from Majestic and AHREFS as well using thier API or importing reports.
2) The software doesn't do this but can easily be added (obvious forehead slap feature to add). As it is you could easily export the data from my software. Check the links with scape box alive check and then add that info back to the spreadsheet created by my software for comparison.
3) If I understand correctly you want to be able to take a competitor's link from say a Web 2.0 site, and then automatically analyze the backlinks to that web 2.0 site and then the backlinks to those backlinks? If so, no unfortunately the software can't do this...at least not without inputting the domains/url you want to analyze.
4) As often as it needs to be updated. I have a lot in mind for it but I wanted to release it to get feedback as well so I know the best direction to take future development.
5) For social activity it collects metrics from Facebook, Twitter and G+1 at the moment. But it is not like a service like reputation.com or something like that.
Hopefully that answers your questions

No questions are silly or dumb. Everyone helps me make the software better and I'm all for that.
It is a free 7 day trial you can cancel at anytime so why not give it a whirl
Jeremy