Rooting and unrooting procedures are device-specific, so for the detailed stuff your best bet might be to visit this section:
Galaxy S - All Things Root - Android Forums
To give general answers to your questions: rooting itself will not make the phone unstable or change its function at all. You can use it as normal and don't have to do anything different. All that rooting in itself does is give you more options.
In a little more detail, on a rooted phone you have the option to let apps use administrator privileges (in Windows jargon - the Linux superuser account is called "root", which is why this process is "rooting"). If an app needs this, an app called SuperUser will ask whether you give that permission. If you do not, the app cannot use root privileges. Hence if you don't give apps permission, they can't do anything they couldn't do before. Most apps don't need root permissions, so for these it will make no difference.
If you flash a custom ROM then how stable the phone is depends on how good the ROM is. But if it's not stable enough for you, you can just install a different ROM or revert to the original one.
Overclocking
will reduce battery life to some extend. How much will depend on how far you overclock and how you use the phone (if it spends most of the time sleeping in your pocket then the maximum clock speed won't make a big difference). Some custom kernels have other features (voltage reduction) which can improve battery life, or counter the effects of overclocking. If you are too aggressive with overclocking it can also reduce stability - generally different devices have different tolerances. So I'd suggest trying this gradually if it interests you, rather than just starting off by pushing it as far as the software will let you. You do not have to overclock etc if you do not want to.
Unrooting is done by loading the manufacturer's stock software instead of the modified (rooted or custom) software. The tools are different for different manufacturers, but it's not generally difficult.
The best is to learn about the options for your device, because they are different for different models. The forum I linked above would be a good starting place.
