For a quick answer see the one page summary. For more details, read the architecture description and Tahoe-LAFS documentation.
Generic known issues (not I2P specific) are:
See the known issues list from the upstream project for details and ways to mitigate.
Yes, everything is encrypted. For details see the file encoding specifications.
Did you just start your node? Wait until you're connected to a few nodes, which takes a minute or two. You can see how many nodes you are connected to on http://127.0.0.1:3456/#grid
You can't automatically right now. There is a rebalance workaround and ticket 699.
Check the official site of Tahoe-LAFS or visit our IRC channel #tahoe-lafs on I2P.