Yeah you can use it on one domain with multiple directories, a few people do this already and have some pretty good Google listings actually.

As far as the amount of posts, it depends on the niche, i have a few blogs that literally just have 24 hand written posts and the rest is all RSS feed driven and i have some that are purely RSS feed driven.

The more popular the niche, the more you should try to have updates (posts) as often as possible imho.

Smaller niches however, do not need to update as often because you have less competition for that traffic.

Regards,

Lee