Should I be concerned about my bitcoin client growing overly large because of generating 1-1000 addresses each day? (as a service, not personally)
How does coinbase or any other online cryptocurrency deal with an overgrowth of bitcoin addresses they have in their programs?

Better article: http://www.theguardian.com/world/2013/sep/05/nsa-gchq-encryption-codes-security

If they mentioned the SHA family I'd get scared, but they probably can break lame to moderate cryptography that some developer shittily put together using widely known techniques. They probably have a huge brute forcing server farm.

The address callbacks set on addresses is not sending. I've tried creating a new address with callback url, and visited that url, and it registered, but then I sent a small amount to that address and it did not fire. What gives?

That's is the most thoughtful feature ever.

Like say I turned off bitcoin-qt for half a day, and I get 1 transaction to my address in that period. Will, on start up, fire the walletnotify script with the hash of said transaction?

Oh yea definitely, I'm trying to figure how to verify that the person giving wealth indeed has a below 22 million balance, most clearest way is to have a block chain of transactions, but thats pretty limiting.

Each address created will start with 22 million units to begin with, this is essentially the same as owning 0 bitcoins, to have buying power, you need have a balance below 22 million, like say you have 21,999,999 balance, this is similar to owning a single bitcoin. The lower your balance is the more you have, so a balance of 0 would be the same thing as having 22 million bitcoins. The reason it's backwards like this to change the direction in a transaction. To gain wealth you have to give away your coins to an accepting party, to loose wealth you have to accept coins.
This puts trust essentially in the receiver of wealth, and I'm sure the receiver's best interest would be to gain wealth.

Mining may be a bit of problem with this idea, but right now I'm just trying to figure out major flaws. This is a really weird concept but here I go:

Imagine a crypto currency where everyone owns the maximum amount of coins (22 million in bitcoins case) and having more than 22 million should be impossible, and having wealth is simply having 22 million minus x. Why have this backward ass system? Think about how transactions would work in this system, for Alice to pay Bob, Alice has to accept coins from Bob. The direction the coins move is opposite of that of bitcoin. Thus instead of the person who is sending wealth being able to be an attacker, the receiver becomes the possible attacker, but why would he sabotage receiving wealth?

There are hurdles that I can clearly see, like mining and how to prevent anyone having more than 22 million, but is my idea sound?

Sounds hard to implement

Theres a similar trust when making a transaction, you hope that the miner will include it. But you can always hope that the next miner will include it. Similar to my system, you just broadcast to as many nodes as possible and possibly wait for an OK response from a few.

Why not nodes just keep track of of bitcoins and where they are? Like so:

Alice wants to send Bob 1 btc she does so and alerts a fair amount of nodes that she did this. The nodes then collectively agree that bitcoin#1251262613616 is now under the control of whatever address alice sent to. Sort of like a database with two columns, a unique ID column, and a proof of ownership column. Mining can still be a chain, but it would be much simpler considering that each block now doesn't have to store transactions. With this system, mining now is piece of cake, no need to process transactions, no need for large block chain. Transactions are as instant as the propagation on them.

Pardon me if I have something wrong technically, I'm beginning to understand how bitcoin functions cryptographically.

https://forums.butterflylabs.com/announcements/3295-bitforce-sc-pcb-schematics.html
From what it looks like that is the only "open sourced" hardware piece, its an outdated pcb board.
Searches on github/internet turn up nothing.
Open source my ass.

Withdraws and deposits as in fiat?

My current method is to just poll bitcoind API for a new transaction. I feel like this isn't the right way.

This seems like an investment risk more than a scam.
His "coin" is similar to ripple, whoever buys in will probably know the risk of a single-minted close-source altcoin. Let it be.

Why out of US?

Github is a good source of these things
https://github.com/search?q=bitcoin+faucet&ref=cmdform
At first glance most of these repos seem alright, you probably may want to look into them a bit more.

Using bitcoind is as easy as installing a library in most languages, search around for your desired language. Node.JS is what I prefer, it's pretty simple with node actually: https://github.com/freewil/node-bitcoin

Well theres a few ways to do it, ranging in difficulty:
The most basic way is to run bitcoind, a headless wallet, on a linux server, this is what I think they are doing, since their website went up in a time when bitcoin was less advanced than now in terms of online services. This method is as safe as your server is, I believe there was a scandal on lithium host where one of the employees simply opened up a customers vps and took the wallet.dat and thus were able to steal coins for themselves.

Another easier way, is to just use an online service, like bitpay, blockchain, or coinbase, and just listen for callbacks on a url you specified. This is easier and was less worries, as coinbase, bitpay, or blockchain take lots of precaution to prevent stolen coins and would possibly spot with their own money a theft (unlikely if large amount). These services usually have nicely generated html buttons to put on your website and actual payment pages you can setup.

An interesting service is inputs.io, they sorta function like visa in which you can pay/get paid with bitcoins, but the transaction happens off the blockchain, and instantly. Off the blockchain in the sense that when you pay with a credit card, actual physical money isn't being moved.The also provide a payment button html code generator and pretty easy api to work with.

Bitcoind, you are going to definately need knowledge of how to program. Online services, less so depending on what you will be doing, running a poker site you will 100% need to put together something in a programming lanuage.

I take it that ec2 is simply too complex for you? (Their payment system is almost impossible to calculate beforehand). If you need something much more simple you can get a vps, cheaper than a dedicated server. If your after a service that's simple and great or amazing to use, heroku provides that. They take away the pain of having to deal with any servers, you upload your code and specify how much computing power you will need by ramping up the "dynos" on your project. 1 dyno = ~512mb vps. They let you use 1 dyno per project free in the free tier. Only bad thing about them is they don't support a wide range of languages/programs, and their routing is bit a questionable but not too bad. I use them for loads a project, specifically node.js projects.