How to get the Dragon Track past the tutorial to a race

Generally they will breed a child of the same exact type, at least 95% of the time in my experience. However they can breed a hybrid of their elements.

When breeding two Chrome dragons (air/metal) repeatedly I found that once I got a Rust dragon (Metal+water)! This is because, apparently, on rare occasion an Air dragon breeds as a fire or water dragon instead of an air dragon.

Yes, once you unlock the Large habitat of a type, any Small habitat of that type can be upgraded in place. There's only two habitats of each type; a normal and a small. You can see a whole list of Dragonvale Habitats on the wiki too. Small habitats usually hold 1-2 dragons where large ones generally hold 3-4 dragons.

The upgrade will cost the same price as the large habitat would otherwise and take the same time, but the Small habitat will function normally while you're upgrading. This means your dragons can stay put and still earn money.

In fact sometimes I find it helpful to buy a small habitat first and then upgrade it, as I get the first 1/2 dragon slots quickly and then the habitat is in use while the upgrade prepares for completion.