Their Orders do not conflict, so no battle will transpire. Similarly, if all Generals on a Front are set to Defend that Front, no battles will break out. This is totally legit, since either side might be choosing these Orders because they know they have the inferior force and just want to ensure they do as much damage as possible without risking their men in an attack.
It's not an instant or painless process: you'll need to secure new input goods, switch to the new ship type, and then suffer major disruption for some time to the naval bases/warships that are being upgraded. Replacing wooden warships with ironclads isn't done overnight.
If you cut off Russian sugar imports and they're heavily dependent on those imports, you'll trigger crippling sugar shortages in the Russian Market, which could for instance completely tank their Food Industries' output.
There is no hard cap, if you can spare the resources required, go ahead!
It's focused around a capital ship with escorts and support vessels, yes. With respect to smaller vessels like monitors which would have multiples to a group, the Flotilla is considered to be named after one of them. Like Battalions, Flotillas are scaled to represent the combined force of 1000 Servicemen and Officers.
In the current build of the game it is only the number of nodes, thus the suspiciously round number in the tooltip there. We are going to change this soon so it scales with the amount of goods that shipping lane moves * how long it is in nodes.
Ports consume Clipper or Steamer ships (goods) produced by Shipyards in order to create Convoys.
Everything produced and consumed in Victoria 3's economic model is essentially a "capacity" in the sense you mean here, including Convoys. But we've made it so it still takes time for damaged shipping lanes to recover once raiding stops.
