1. Well, fun... The PvP is unbalanced as hell at certain stages (magic users can and WILL instant-kill you if you don't hide behind something, playing at "The Last World" with magic users is no fun at all, for example). The boss fights aren't bad, but if 1 person dies, there's a countdown. When it reaches zero, the battle is lost, no matter what's with the other up to 5 characters.
After the round ends, you get 1 of several different items (items to upgrade, even rare ones if you're lucky, new colors and a bit more) which adds a bit to the lasting appeal.
In boss battles, the only items you can get is either a weapon, which depends on the boss you killed or 1 material to upgrade it. Sadly, even though the online bosses are more difficult than the offline ones (which is a good thing), they become WAY to easy once you upgrade certain weapons (like the online ones). Also, last time I played, there were only 6 bosses (so barely any items at all and I don't know if they even changed the amount of bosses) and if you want to upgrade one of the online weapons, you have to do the same boss over and over and over and over and over again.
So in short, PvP is pretty much no fun at all. Fighting bosses is fun at first, but gets annoying, depending on other people and your equipment. When I played, pretty much nobody wanted to play as e.g. Kanan, so the other ones died not only pretty fast, but pretty often too. (But maybe that was just my bad luck with the people who joined)
You can set different textes from the characters too, so you can shout e.g. "Someone diffuse that magic!", though many people tend to ignore it.
Also, you can only use your character from the story mode during boss fights. In PvP, all physical attackers are the same, except how they move when they want to diffuse magic (For example: Elza rushes to the destination, Therius jumps to the destination). Same with the magic users, the only difference between them is the element and therefor the effect when you diffuse their magic. Additionally, you can either set the PvP fight to "Free for all" or a team battle. (As long as you're on the 1st spot in the room)
2. When I last played it, yes, most of the time there were 4-6 players in our party and most of them stayed long enough so that you can play several rounds, though it's been a while since I last played The Last Story.