How often do you intend to release episodes? Do you feel the time between releases will give you a chance to take on board any comments - whether they be good or bad - regarding the previous episode?
We are planning to release a new episode as frequently as every quarter. This will give us enough time to take in the comments as well as see which aspects we need to revise, enhance, tweak for future episodes.

Do you intend to release the episodes of the game over Live Arcade, and, if so, how much of a challenge is it to work within the 50MB limit?
Apart from the fact that our episodes will be less than 50MB, it is highly unlikely that we would run into this problem, because the episodes will most likely not be released via Live Arcade, but rather through regular content download - similar to how patches and updates are pushed through, regardless of size. Then again, we'll have to wait and see how this goes because it is entirely up to the publisher and Microsoft.

What advantages and disadvantages does episodic content present for 3000AD?
As I mentioned earlier, the primary advantage is that we get to extend the life of the game while gaining residual income through its life. I can't see any disadvantage to this model at this time. Our scenarios are primarily script (all data) driven, so the resources required are minimal.