When doing a friendly battle or tournament on Clash Royale are all your card the cap level or is that just the max level it can be

Epic cards, like Prince, can only be requested on Sundays.

On Epic Sundays, you are allowed to request Epic cards once. The number of Epics you can request at one time is equal to the number of Rares you can request.

Legendaries cannot be requested.

You will receive 1 XP and 5 Gold for each Common card donated or 10 XP and 50 Gold for each Rare card donated. For every Epic card donated, you get 10 XP and 500 Gold.

Source: Clash Royale wiki, "Clans - Donations and Requests"

Here's the full mechanics on card requests / donations:

Clan Members can request Common, or Rare cards once every 7 hours with Epics available on Sunday. Cards received depend on your Arena level and card class:

Goblin Stadium
Donations – 1 Common or 1 Rare
Requests – 10 Commons or 1 Rare

Bone Pit
Donations – 2 Commons or 1 Rare
Requests - 10 Commons or 1 Rare

Barbarian Bowl
Donations – 2 Commons or 1 Rare
Requests – 10 Commons or 1 Rare

P.E.K.K.A.’s Playhouse
Donations – 4 Commons or 1 Rare
Requests – 20 Commons or 2 Rares

Spell Valley
Donations – 4 Commons or 1 Rare
Requests – 20 commons or 2 Rares

Builder’s Workshop
Donations – 4 Commons or 1 Rare
Requests – 20 Commons or 2 Rares

Royal Arena
Donations – 6 Commons or 1 Rare
Requests – 30 Commons or 3 Rares

Frozen Peak
Donations – 6 Commons or 1 Rare
Requests – 30 Commons or 3 Rares

Jungle Arena
Donations – 6 Commons or 1 Rare
Requests – 30 Commons or 3 Rares

Hog Mountain
Donations – 8 Commons or 1 Rare
Requests – 40 Commons or 4 Rares.

Electro Valley
Donations – 8 Commons or 1 Rare
Requests – 40 Commons or 4 Rares.

Legendary Arena
Donations – 8 Commons or 1 Rare
Requests – 40 Commons or 4 Rares.

You cannot receive entirely new cards by request. It’s necessary to first discover them through Chests.

Donating cards also gives you Gold and XP:
Common > +5 Gold & 1 XP
Rare > +50 Gold & 5 XP

Source: Supercell Support's Card Request / Donation article

Yes you can. It's qutie simple actually: An upgrade adds +10% to the stats.

For troops:
+10% Hit-points
+10% Damage
+10% Damage per Second 

For Buildings its:
+10% Hit-points
+1 Troop level/ +10% Damage

For Spells its:
+10% Damage
(for freeze +0.3s duration)