FYI, you don't have to buy a separate license to upgrade to threads; your UBB.Classic license just needs renewed (a difference of about $100). (If you ever end up with a spare license, keep me in mind :ahem:)
Your assumption about the upgrade route is correct, the UBB7 importer from Classic requires that you be in the 6.7 release of UBB.C to properly read all data.
UBB7's control panel looks a LOT like UBB.c6, in either product you can use the member management screen to search for users, then select them and choose delete from the dropdown at the bottom of the page; or you could also choose "all users in search"; I'm not sure offhand how many users show per screen however (I believe it's like 25?).
This error is an error set by your ftp server, as a user you have 0 control over its configurations; you'll need to contact your host. In short, they need to make a change to their /etc/pure-ftpd.conf file and set the value for the LimitRecursion values.
