You can kill NPCs in Dark Souls, just as you did in Demon's Souls. Some people kill Lautrec early on, for example, to obtain his very useful ring. If you ever accidentally harm a NPC, they will be hostile towards you, but you can "absolve" your sins at the NPC "Oswald of Carim" in the Church after the Bell Gargoyle fight to make them unhostile. The cost is Soul Level x 2000. Some covenants will also become hostile if you dishonorably leave them (abandon covenant without use of Oswald, betray their rules, etc.), which is also something that can be absolved at this NPC.
Unless you kill Oswald, you can always resort to this method to make the NPC's like you again (note that this won't revive them however if you killed them).
You might miss out on some story/sub-plots, but you should still be able to complete the game having killed all the NPC's that you are allowed to kill. It is hard to say for certain what the impact on the game will be as there are so many NPC's in the game with different functions.
There is an NPC, Kingseeker Frampt, that will consume your items in exchange for souls. He appears near the Firelink Shrine after you have rung the two bells. So yes, there is a way to sell item, but not until later in the game.
However, there is almost no limit to the number of items you can have in your inventory (see this question Is there a limit to the number of item in inventory?). You can hold up to 1984 different items in your inventory, and if you purchase the Bottomless Box, from a merchant in the Depth, you can store all those items in it and have a manageable inventory.
However, I think you should just drop the duplicate items because the resell value is really low. This table, from one of the Dark Souls wiki, shows how many souls you'll gain from each class of item:
Weapons 50
Armor 100
Dung Pie 200
Cracked Red Eye Orb 500
Copper Coin 1000
Some unique items 5000
Even if you resell 1000 longswords, you'll only gain 50000 souls. Compared to the time it will take you to sell all of them, and to manage your inventory, I think it is not a good trade-off. There are quicker ways farm souls.
During your second play through, reselling some of the unique items may be a cheap way to get some souls. However, reselling basic items does not seem interesting to me.
Best Answer
It is definitely possible to block this attack. It's all a question of Stamina. The way that blocking these and most attacks works is that the particular attack's Stamina damage is subtracted from your current Stamina. If your Stamina reaches zero, you end up staggered, and if your Stamina goes too far negative, you fail to block the attack at all. This is the issue with the Capra Demon's overhand smash: It does a ton of Stamina damage.
Thankfully, there is a way to mitigate this. Before an attack's Stamina damage is applied, it is first reduced by your shield's Stability. The current guess is that this is a direct percentage: I.e. if an attack does 200 Stamina damage and your shield has 60 Stability, you instead take (100% - 60%) * 200 = 80 Stamina damage. Small shields top out at ~45 Stability, standard shields top out at ~60, and greatshields hit 80+ Stability. This is why heavier shields tend to block better, even when they have the same DR%.
Long story short, if you want to be able to block the Capra Demon's overhead smash, you'll need a shield with high Stability—like the Balder Shield, Tower Kite Shield, or Caduceus Kite Shield, which are all available pre-Capra—and a decent amount of Stamina (from Endurance). If you have a Greatshield handy, use that instead, and upgrading shields usually increases their Stability. In the end, though, it might just be more convenient and Stamina-efficient to dodge the attack, if you can.