It is very slow compared to hardware bone animation. The only difference, or advantage with using the CPU, is i believe you are unlimited to the number of bones you can use, whereas, with Graphics card, i believe have a limited number of bones they can use.
Broadly. yes. The number of instructions a shader can include varies according to the shader model, and the older (read:outdated) shader models like 1.3 and 1.4 didn't really have enough instructions to transform as many bones as you might conceivably want to do. Nowadays even entry-level onboard videocards are Shader Model 2.0 compliant, so the only cards around which would have problems would be really old gamer cards, and obviously gamers tend not to have old machines. Besides, with FX shaders, it's trivially easy to set up multiple fallbacks and drop the number of bones on older hardware. I wouldn't bother personally, but it's dead easy if you wanted.
Boned animation in Blitz3d, uses the CPU to calculate the transformation of the vertices, and is therefore alot slower than using the dedicated GPU to do this. I'm not sure if it's a limitation of blitz, or DX 7 though.
DirectX 7. Blitz couldn't use the GPU if it wanted to. Having said that, the transforms do seem to be especially slow, as witnessed by people who have written their own animation handling system and achieved some major speed increases even on the CPU. No idea how they did that mind, as I'm doing it purely on the GPU these days.