Does that mean that I shouldn't give my highest scoring bugs first?
Yes. If you want to get as many items as you can get you should start off weak.
I'm also concerned that if I give lower quality bugs that I'll get lower quality furniture, or will Nat always give you a piece of the Bug set regardless?
How it works is until you meet a certain point level (it was 80 points for me) you will get normal furniture from him every time you break the record. After you break that level of 80? points, each new record after that (including the first) will yield another bug furniture.
So I'm not even entirely sure I can direct the outcome the way I want to but I'd like to try. What should I do to guarantee the most pieces of Bug furniture?
Bugs are graded by three things: rarity (easiest to "manipulate" but you have to find the right bugs), relative length (the game tells you this right when you catch the bug, if you can sort your bugs of the same type by length) and luster/color (this is random and there is no indication of luster until you give it to nat). To maximize the bug items you get, start with not-so-rare bugs and work your way to the rarer ones, working in order of size when you have a bunch of the same bug.
Rarity can roughly be measured by how often you see a bug around. Common butterflies are super common, tiger butterflies are uncommon, emperor butterflies are sort of rare, Raja B butterflies are quite rare, as an example.
Note that the bug off is held monthly, and you probably won't get all bug items in one month. Personally I only managed to get two (I could have gotten more though).
Also not that at the end you'll get a ribbon based on performance. You get a ribbon based on placement, not on how many bugs/furniture you've gotten. A single, high scoring bug will get you a gold ribbon.
Yes, the Nooklings store will never sell any furniture item that you cannot order via a catalog. Similarly all items in the Able Sisters shop can be ordered, even "Nintendo" items from them like the Lil' Bro's Hat.
Also note that items found in balloons are often unique; the "balloon" set cannot be ordered from Nooklings' either, just "normal" furniture items (if balloons even still drop that stuff). When in doubt you can always check the catalog itself, it will say "Not For Sale".
Best Answer
After a bit of digging I found that... YOU will always maintain the shape of your house, no matter how much you upgrade it. You also have the protection of a 1x1 "No Build" zone around your house. Essentially it just means you need to be able to move freely in this area. VILLAGERS also need to follow these standards. They need a 3x3 plot PLUS the 1x1 free space around their home. So!
They would not be able to squeeze their house between you and the cliff because they do not have enough room due to not having the 1x1 "Walking Path" around their plot. I hope this helps!
Thanks to GameFAQs for the Info! (Two Links there)