Is my understanding correct in that you can have say a sort of 'hot' wallet or rather everyday use wallet (with no password) and then say two further wallets each with their own password. If one starts up the Trezor you then only need to enter the relevant password for the wallet you are trying to access?
yes
If the above is correct, is there a limit on the number of wallets you can have on a single Trezor?
no (not practically at least, it's limited by the maximum amount of possible passwords)
Just keep in mind that if you forget a password the coins associated with that password are inaccessible forever. No way to recover from lost password as the password is used in the encryption to create a unique set of keys.