1) Do people gamble with odds that are above or below 50/50?
Yes. Higher the risk, higher the reward. That's just about it.
2) How do people respond to large losses (in the event of conservative betting) or large wins (in the opposite event)
That depends on people. Large losses, I don't take it personally if it's my fault. I would take it personally though if the game was rigged for me to lose. Besides, I never really gamble an amount that I cannot afford to lose so of course, whenever I gamble, I always have to think of the chances that I may lose them all.
With large wins however, if I did get 2x my initial, I'd probably stop and go for a different game.