1) This likely violates the ToS of any residential internet service.
I believe it can be done in a way that it's not very likely that you'll get caught. Especially if the bandwidth usage from that is not massive. I have a 100mbps connection which is fairly common here and no one would care if I share 10mbps. There are no quotas or limits either. Using some kind of encryption/VPN should be explored also for increased security.
1b) People could browse naughty areas of the internet, and YOU would be the one to get in trouble for it.
Finnish ISP's commonly use what is called DNS filtering to block these sites. Other than that, the same concerns go for point 1) which can be countered by features that encrypt the traffic.
2) It's largely pointless considering the small number of people who use Bitcoins. Like P4man said, the likelihood of someone who uses Bitcoins is walking in your neighborhood looking for internet access is incredibly slim. Of course, if Bitcoin got big, then I could see it as a viable option, as long as 1) and 1b) can be worked out.
This point is just stupid. The concept we're talking here is revolutionary, it's the kind of thing that would attract people to learn about Bitcoin even if they don't know anything about it in advance. In Europe it's a very common problem that when you travel to another European country, using your local 3G is super expensive and buying a 3G package from there is a pain in the ass. There is no wlan available everywhere either and if there is, it's often not free and requires credit card information. This has the potential to change everything.
3) I like the idea of simply changing your SSID to show "Bitcoins" or "UseBitcoins" or "ISupportBitcoins" or something else to that effect. Kind of free advertising for Bitcoin.
This is something that I don't think has any effect because most people don't even know what Bitcoin is, telling people that "I like Bitcoin" in this way means nothing and it's not going to lead to people finding out. Renting your connection with bitcoins however is something that could spread like wild fire and start getting attention. An open wlan with a login page having bitcoin payment instructions would in itself be huge.
Of course it is smart to think about how ISP's would respond to this, that's why I mentioned exploring VPN possibilities.