1. I think the answer to this question depends on the game itself. I like the set up for my own game. For me, the rules page is kept very simple on purpose. Anything and everything else just goes into the FAQ, which I tried to have flow in order of relevance. (If you'd like to see them, you can view here and here. I'm not trying to plug my game at all. It's actually quite dead. I just thought you might like my examples. =D)
2. I like to see a list of basic rules about how the mods expect players to behave, how often they should be active, and as well as as formats for posting in the respective communities. As far as that, I don't think there is a need for too many rules. A lot of stuff can just go into the FAQ. (Which is basically what I did if you've already looked at my links.)
3. I haven't seen many rules that are a turn off for me. The only thing I can think of is certain mod's requirements for activity. Some of the requirements I've seen are just ludicrous. I mean, if I'm required to post 5 times in the community, post 5 times in my character's journal, comment at least 20 times on other threads, etc. per month... That's a bit overboard. If someone is only posting once a month or something, that's a different matter. I play these games for fun, but some people make it feel like a full-time job, and I don't get paid to do this!