ShadeDad,
First, the terminology varies depending on the OS you're using (iOS, Android, Windows, or LDS.org) and you didn't say which you're using, so I can only guess. And journals and notebooks are areas where the terminology differs greatly. I use Android and have used LDS.org, so the below uses Android terminology.
Second, IMO, play around a little, ponder, and then come up with your own use for the features - there's a lot of overlap in functionality, so you can really adapt it to your own preferences.
Journals: The "Journal" collection contains Journal Entries. The menu option for "Add Journal" really should be "Add Journal Entry". Think of each entry as a page in the journal. As you've noted, the date displayed is the most recent date (create or update), so if you want your entry to include the create date, you should add that as (part of) the title or text. To assist in finding entries, you can use both tags and notebooks. (E.g. you could use one Notebook per year (named for the year), and tags for topics; or vice versa; or your own combination; or just use one of them.)
Notebooks: These could be thought of as a journal (put your Journal Entries in one of these and it's now a Journal). (You could also think of Journal Entries as pages in your notebook.) You can have multiples of all these and give them whatever names you want. As you noted, it's a good place to mix your own writings (journal entries) with annotations (highlights from other books in the Gospel Library), sort them as you wish, and then use that to give a talk or teach a lesson. You can also just use it like a 3-ring binder - add stuff into it, sort the stuff, keep it until you're done with it, then delete it.
As far as limits, only the development team know that, but as a developer (not on any church projects), I suspect I know basically how they've designed it, and if I'm right, the only limit would be the amount of free space you have on your device (or some other resource-related limit). And that should put the limit high enough not to worry about it (the guy who made the iOS videos I mention below had *boatloads* of notebooks and journal entries in those notebooks).
I'm not aware of a size limit on a journal entry (it's larger than you want to type on a mobile device - I know that). I doubt there is a size limit.
As for finding entries, I recommend some up-front pondering and planning. Also, note that the journal entries appear to be indexed, so you can search them, and I don't know why that would be any more cumbersome than searching the scriptures (or worse, a paper journal). You can also export journal entries (or entire notebooks) on LDS.org, which would put them in MS Word or XML or whatever other options they have. This might make searching or archiving easier for you. (The iOS journal video below shows that.)
Finally, if you have iOS, there are excellent training videos at the link below - even if you don't use iOS, his Journal video does have some good thoughts on why you might use a journal / journal entry:
http://gospellibrarytraining.blogspot.c ... y-and.html
If you have Android, I've done training videos, and blog posts with some extra thoughts. The introductory article is at the link below, which links to each of the posts in the series, each of which links to the video:
http://www.lizmcguireonline.com/index.p ... y-training
FWIW,
Liz
