OfficePool is a program which can manage anywhere from 100 to 10,000+ brackets. Having your pool participants cover the cost of the software is not unusual, and is in fact encouraged. If you choose to do this, the cost of the software is 25¢ per person for a pool of 100 people and is 2.5¢ for a pool with 1,000.
As for the second question, the answer is yes ... unless you choose to use an older version and update all the tournament teams, abbreviations and records manually. In addition, you will not be able to use the Web Entry Form unless you are hosting the form and the form processing scripts.