Hi Amethyst
The Art Show is not live bidding, its pre-bidding. If items get enough bids in pre-bidding then they go through to the live auction on Sunday evening. If they don't get enough bids for the live auction they sell for whatever the highest bid is when the Art Show closes on the Sunday (You choose a minimum bid when you submit the item). The Sponsor early entry is just an extra benefit for sponsors where they get to have the first look, before the room gets too crowded, though they can still bid.
As far as the copyrighted characters goes, as long as it's an homage and not a direct copy then that would be ok. For example, drawing your own interpretation of what Puss in Boots should look like should be fine, drawing the Dreamworks version of him and selling it, on the other hand, would not be.
Hope that helps