autoblogs have a risk of being caught and penalised by google and so you might want to leave this idea.
no it is not , just dont over do it. Dont setup more than 20 autoblogs on one hosting account. And yea u can setup autoblogs on subdomain also.
yeah this its probably a good practice to spread it out in case something bad happens. When there is risk, don't want all eggs in one basket.