1 - So many? There are many of any software product. And as with all software, some people continue to use an old version.
2 - Most often they want to include something not in the vanilla kernel
3 - This could break your system, or at least the parts that depend on the modifications
4 - A question you can only answer yourself. Do you want stability? Bleeding edge features? The latest stable kernel, 2.6.24, might have something you want. Or the -mm beta tree. Or the stable 2.6.16 series. Choices are infinite.