1. Yes, that's pretty much it.
2. On several newer systems, using the "Enhanced PCI access mode" setting in your computer's BIOS (or something to the same effect) will cause this. I have no idea why, but disabling it is a good start. Also, a misconfigured 2.6 series kernel will also generate similar errors. You will want the options
CONFIG_UNIX98_PTYS=y, CONFIG_UNIX98_PTY_COUNT=256 and CONFIG_DEVPTS_FS=y when configuring your kernel to have proper virtual (and actual) console access.
3. goto 2