The photos are imported into the iPhoto LIbrary Package which is not openable by the Finder like a regular folder is. You appear to have a "Managed" library (the default type)
so photos are copied into the library. Once you assure that the photos are safe in the library you can delete the "source" copy from your hard drive to preserve free space on the drive.p
The theoretical limit for iPhoto 11 is 1M photos. What that means in file size will depend on the size of the imported photos, how many photos are edited, and other considerations. So there's no files size limitation for the library except the HD size.
Personally I would not use the "Referenced" type of library. There are too many things that can go wrong which will irrevocably damage the library causing you to start over with a new one.
Terence Devlin clearly spelled out the pitfalls of a managed library in his post in this topic: iPhoto Managed Library and Referenced...: Apple Support Communities