Oi! Wordpress users, come here I have questions.

So I've been playing around with Wordpress after reading reviews that claim it is much more flexible than Blogger.I need to check a few things with you, though, because my experimentation haven't turned up many benefits. As a disclaimer I am using the free service on dot com. So,

Is wordpress.com fully customisable down the the code of the theme if you buy the Pro package thing? With just a free blog you can't even alter the blood CSS!
Does self hosting with wordpress.org remove you from the benefits of categories?
Holy hell is hosting really that expensive? Seems to hang around 20-30 quid a year, not much for the professional blog but steep after the £6 I've invested so far.