When you come up for air, does it matter how long you stay up

After two full days of waiting, the Thieves Guild fence Tonilia went from 8 gold to 1000 gold - it's possible that it varies from merchant to merchant, but two days seems standard so far.

Making it "easier to cast" is relatively straightforward - it reduces the Magicka cost of the spell, meaning you can cast them more often.

This is similar to how things worked in Oblivion. (I'd link you to the UESP page documenting this, but the Site's still getting hit pretty hard from all the Skyrim traffic)

Each spell has a "base cost", which is modified by the following formula:

spell cost = base cost * skill multiplier * perk multiplier * equipment multiplier * dual cast multiplier
skill multiplier = 1 - (skill/400) ^ 0.65

This means that at 100 skill, spells cost 60% of the base cast (further modified by perks and equipment).

This isn't combat related, but as Affe has pointed out below, increasing your magic skills is required to buy high-end spells from vendors.