What do I need to know to use LFS
 

I was thinking about starting to use LFS as a kind of project. Is this
OS very hard to set up. and what do I need to know to get started?

You need know nothing at all for LFS (Linux From Source/Scratch) though it helps if you have compiled things from source before and if you have a backup computer. The whole point of LFS is to teach you ... have fun you brave brave person you.

Hail Eris

You need to know it's only a learning tool until you've become very comfortable in linux. If you want to use it as your main OS you have to learn how to compile packages or follow one of the other suggested methods for managing software (see the hints section @ linuxfromscratch.org). You need to know you'll screw it up a couple of times at least. It's a fun OS to use though when you get it up and running well.... and Gnome is a nightmare to setup compared to KDE.

And youll need a fast computer otherwise compile times will end up being far too long.

I never got much past the end of the LFS book with my system but I hear that Oo.o can take multiple days to compile.