I personnally think the lyrics industry is saturated, there are way too many out there. But if good SEO is done, and it is promoted extremely well, it should do fine. The main source of traffic for lyrics sites should come from search engines.
1) Yes it's good, as it gives a lot keywords 2) No it isn't that good, as there are 18944948 others already... So it's up to you... do you want to make all those efforts.. keep updating your site everyday... and than earn well... Or would you better start something else? Greetz