@opticshrew I'll answer the best I can, but these are conversations, not quick answers.
(1) How many users would it take before there were noticeable issues with Power Bi reports using direct query?
You would have to baseline your sql server and the current network traffic to that server. Then monitor the traffic increase, server load, and also do the same for the server that is hosting the gateway.
(2) Would this be the same when users are accessing the reports via Power Bi Report Server?
You would reduce traffic significantly if you are suggesting that you use "Import". this method would store a copy of the data in the cloud and only be refreshed when you scheduled the dataset refresh. Direct Query will be sending queries back and forth for every user interaction. You can limit this a bit in the Desktop. There are options to only execute the query after slicer selections have been made, etc. But understand that Direct Query is most likely the slowest and least user friendly in terms of end user experiance. It also requires the most understanding of all the different aspects involved in order to troubleshoot. I actually just wrote up a blog on this if you are interested - here
(3) Does increasing the spec of Report Server influence performance?
I assume "Report Server" is referring to the database location and gateway install. There is loads of information in the tech article that may be useful here Overall, I believe memory and network bandwidth are the two main blockers for performance.
