Hostgator is OK and I will assume that you are using a cPanel.
The recommanded architecture is the one present in the tutorial video 0.b
www.jms2win.com/en/tutorial#jms12x-0b
We recently create new powerpoint for the joomla day strasbourg and that are currently available in the documentation section only.
www.jms2win.com/en/documentation/doc_det...-day-strasbourg-2012
Create a subdomain for the master website.
master.yourdomain.com
The location on the disk should be /home/account/domains/yourdomain.com/subdomains/master/public_html
Install the Joomla 2.5 in this directory and install JMS in this "master.yourdomain.com" website.
Put also a specific DB for the master.
Keep your cPanel "public_html" as empty as possible.
Install kunena in the master and all the extension that you may need.
Don't put any content in the extension.
Create a "portal"
www.domain.com where you will put your portal (and all the users).
Create this "portal" into a specific DB.
As you expect to have a large number of "cities" (more than 25 / sometime 100) you will probably have to create specific DB for each cities and share the joomla users between the DBs.
Once you will have created a "fresh" portal, you will have to create a JMS template rule to share the portal and in particular select to share the users and kunena.
See tutorial video 16.
www.jms2win.com/en/tutorial#jms12x-16
As you mentioned that you want to have different permission between website, you also need the "partial user sharing" extension.
www.jms2win.com/en/joomla-multisite?page...52&category_id=1
Concerning the "template variant" like logo the solution depends on your joomla template. In your case, it seems better to keep the joomla template shared between all the website and perhaps ajust the location where the logo image is read. If this is hardcoded in the joomla template, you can change the location of the logo to provide a specific location for each website (ie. use a directory like image_specific/logo.jpg instead of a image/logo.jpg). So that you could continue to share the images directory and also have specific images directory.
1) No red flag. You can do that.
2) As many DB as websites because more than 25 sites.
3) Use the Symbolic Link - don't copy.
4) Master should remain "private" or confidential - not public.
Any slave site can be deployed in your cPanel primary "public_html" account.
5) We do not recommend to put any content into the master.
This is a repository or a library where you install all the extension - Not the content.
5b) Use the "partial user sharing" if you want to have different permission depending on the site.
6) The sharing is a decision take when you create the MySQL database tables.
Either you share the mySQL tables or you create a physical copy.
If you have decided to have website with their own users, you can no more change that because for example the User no 1 in Site A mean "jean" and the same number 1 in site B mean "paul".
You can understand the User number 1 has different meaning depending on the website.
When you share the user, this mean that User number 1 has only 1 meaning and can not have several meaning.
7) To share the banner, select an extension that can do that.
Becarefull that you can NOT both share and not share the content of a specific extension. So use different extension (one for the sharing and another one for the non sharing banners).
8) You can install the extension in any order.
We just think that is better to install all the extension before install JMS.
So that you will install the patches only once and not (perhaps) have to re-install patches after that an extension is installed.
9) The partial user sharing for the permission.