Dear Mark,
a.) local WWI installation: do not prepare a "local" gen server installation; it should be a "simple" local installation (to maintain, enhance, develop etc. WWI layouts). During WWI set up you are asked for in which way you would like to install the WWI. Even if you succeeded to install WWI on your client as "gen server" this is the "wrong" approach. A gen server (in contrast to local WWI installation) must be up and running 24 hours 7 days a week in prod without any disturbance !
b.) your understanding is not correct (my own conclusion based on this observation is that the creation or update of the template should be made where WWI generation is configured.); WWI layout are developped locally and not on WWI gen server
c.) Based on my own conclusion, the update or creation or update of the template should also be made in windows server. => no; WWi layouts are devlopped locally and not on gen server
d.) i clearly assume that no ! end user will update templates (I do not know one end user how would be able to do so; this is a clear development step). And again: you are not correct. Local WWI installation is used for template development; gen servers are prepared to take care e.g. regarding SDS distribution, GLM printing etc. and must be up and running 24 hours 7 days a week; a local WWI installation is used only for WWi layout development and normally a very low number of persons in an IT company do really know what they are doing regarding WWI layout)
But you need on the top a "local" WWi installation for any end user. This is needed to execute "Create Report from template" by end user and it is needed in context of CG50/CG54 to support the end user. Starting with EnhPack 3 you have on the top the possibility to use additional WWI servers for "Report from template" and "CG50/Cg54" activities of end user. Here I have no experience. Up to now I haven'T had contact with one company using this approach.
Check e.g. http://www.slideshare.net/shivaprasadd/ehs-wwi-cookbooken
Chapter: 4.5. Don't use option "Install Generationserver"
The whole topic of set up etc. of Gen Servers is explained in this document very well (be aware of the fact that may be on SAP Marketplace a newer version of this document might exists; but it is a good starting point).
Depending on the size of your company, business running etc. normally between 20 - 50 persons need local WWI installation (as part of SAP Gui installation) to use "Report from template" etc.;
Hope this helps you to get a better picture.
C.B.