1 - yes
2 - yes
Beware that changing the account's default delete method from "move to deleted" to "hide" will not change the destiny of those messages already moved into Deleted.
http://www.aqua-mail.com/forum/index.php?topic=1439.msg4475#msg4475Yes, it accumulates messages to a certain point. K-9 does too, and gets slower over time on some devices.
Some devices benefit from "Menu / Compact the database" from time to time, but it's not specific to hiding messages. On these devices, the app's data storage gets slower over time - on most others, it does not (same Android everywhere, I'm not secretly using Windows Phone 8...)
It is possible to restore hidden messages -- Menu / Show hidden in message list mode. Something I've not seen possible in other mail apps, Thunderbird even.
@dirk - I'm open to better wording... "Hide in the app, keep on the server" seems pretty descriptive to me, that's exactly what it does... On the other hand, if you, or anyone else has a suggestion, feel free to let me know (Eng. Lit. degree, anyone?).