Knowledge of a character is left intact, including what techniques they know. However, a wizard would be stripped of his magical might, so while he would remember how to cast spell, he would be unable to use his magic. Likewise, a swordsman would keep all of his knowledge of sword techniques but would be much less efficient at it while equipping Jobs such as Black Mage. They would still be able to use their swords as a Black Mage, simply less efficiently. This problem however could be palliated by equipping Black Mage + Warrior.

Yes, five is the total that they can swap in/out of via Moogle. They start out with two Jobs, and can acquire more by asking Jessie or through events. This number may raise in the future.