OK. To BRIEFLY answer queries here...
A- "flashing" essentially erases whatever was on the device and installs a fresh operating system in it's place.
B- Old , out of date, and cheap are relative terms.
It is important to change the mindset...STOP thinking in APPLE or MICROSOFT age. STOP thinking that unless it has 4 cores and exploding graphics it must be useless.
For those that don't know. The maemo os is a linux platform. Lean and mean...even though it seems you have little to no storage or space for installing apps or programs ...you'll be surprised. As well...newer devices software (if compatible enough) can be "ported" downstream to older devices...making them more current, flexible and beastly in ability...likewise "porting" software upstream to newer devices is a benefit. As well the community runs the maemo line now...hence users finally have control over their own devices...there is no planned obsolescence here. We maintain and run and enhance and write and work on fixes and help each other as best we can. We all are the support centre.
So the n800 may be a decade old but it's usefulness isn't bound by the turbulence of time. The greatest issue that faces the device would be the increasing mounting change by browsers ...and THEIR unwillingness to have a space for devices that don't sport the latest and greatest. That is an irritation but there are still many browsers that determinedly perform wonderfully on the devices.
C- It isn't a phone. It's an internet tablet. you can walk into any wifi area ...make calls with skype (I have a north america unlimited call homephone/cellphone/computer free for $30 a yr.) ...or gtalk ...or gvideo talk. Not too shabby. Not that I endorse it... you can use "pen tools" on this device verrry nicely. So essentially you have wifi wherever you go....to say the least. There is no phone contract or service provider you are chained to.
D- there is a subsection in the downloads bar at the site top...click on that then click on OS2008...there are quite a few programs with subsequent write-ups with them and screen shots....That can give you some small idea of what the n800 can do.
Their are a ton of posts in the n800 forum and the OS2008 forum discussing what the device can do...use the search inside the subforum...it will narrow your results....Read..read ....read...the n770/n800/n810/n900/ and the soon to be Neo900 are hacker's delight. If you want a device to think for you ..for you to have little say in what you wish...android and apple and windows will happily oblige and your privacy/security are the least sacrifice.

Hopefully a Moderator will take this whole thread and put it in the n800 subforum...in case that doesn't happen.. ...let's get you into the subforum where this conversation should be.
Please post any questions inside the n800 subforum...this thread here is going to very easily get buried quickly...and that won't help you...nor anyone else looking for the same answers inside the n800 forum. Post any questions there ...I and other n800 diehards will see you and help as much as we can... I'll fill you in...and others I'm sure will chime in as well if I miss anything.