1) http://ww2.pervasive.com/Database/Products/PSQLv10/Pages/v10SystemRequirements.aspx
2) Only NetWare servers are upgraded from the workstation. Since there is no NetWare version of PSQLv10, I'll assume that you have a Windows Server. The upgrade should be done from the server console itself (don't use Remote Desktop) from an Administrator account, if possible.
3) Not specifically, as the install WILL shut them down for you. All users should be out during this process. Personally, I'd shut them down manually, first, anyway.
4) Yes -- the PSQLV8 client is MOSTLY compatible with the PSQLv10 server, but not entirely so. You should upgrade ALL clients to the PSQLv10 client at the same time.