1) It works. Not nearly as effective as pressurized CO2, but it definitely adds CO2 to the water column, depending on your diffusion.
2) Any yeast mixture that enters the tube due to knocking the reactor over, dropping it, shaking too vigorously, etc. will end up in the 2nd bottle rather than the tank. It can even be an empty bottle to catch any drippings from the first section of tubing.
3) You absolutely can't. Not for a 25g tank. Unless you have absolutely spectacular diffusion (like, seriously, darn near 100%), AND you have multiple CO2 bottles.
4) Airstones work, but you'll have to toss them after a week or two due to gunk buildup. Glass/ceramic diffusers work best, but even they're hit-or-miss depending on the quality of the manufacturing process. Some will do wonderfully, some will do allright, and some will not work at all because the necessary working pressure can't be reached with DIY CO2. In a pinch, a broken-off piece of bamboo chopstick stuffed into the airline will do the trick.
5) DIY CO2 is an almost mandatory step in the planted tank experience evolution that is inevitably tossed aside for pressurized. Experiment, enjoy, but don't invest too much cash. Good luck!