In a faculty job search, when and how should I reveal my preferences?
I've served several years on the faculty recruiting committee for my (US, top 10) computer science department, including three years as the chair.  Protocols vary significantly between different departments, different searches, and especially different fields, so take my experience as a sample, not as a definitive answer.

Faculty hiring is best thought of as a complex multi-player game of three-dimensional chess, using invisible pieces that occasionally explode, where nobody knows who the other players are or what rules they play by, and nobody wants to reveal too much information.


  Question 1: How often are offers made before the end of the interview period (i.e., before all candidates have been interviewed)?


It happens, but normally only when one of the early candidates emerges as an overwhelming favorite, and that candidate has another offer with an inflexible (or already extended) deadline.  But nobody wants to be forced into this situation.  It's really bad form to interview someone for a position that doesn't exist.

Some universities allow limited gambling with slots.  A department might offer a position to candidate A, and then later make a second offer to candidate B for the same slot, under the assumption that at least one of them is likely to say no.  If A and B both say yes, then both A and B get jobs.  (I've seen this strategy go very "badly", with four low-probability offers made on the same slot, all of which were accepted.  Gambling was outlawed for the next n years.)


  Question 2: If a candidate expresses that a school is her top choice, does it make any difference to the hiring committee?


Especially at universities that (a) forbid gambling and (b) do not let departments roll unused slots from one year to the next, departments do balance the desirability of various candidates against the estimated probability that they will accept an offer, to minimize the risk of not hiring anyone at all.  (This scenario also tends to generate offers with very short and inflexible fuses, sometimes while interviews are still ongoing.)  

But just telling us that we are your first choice probably won't help much.  We want to believe you, and we appreciate your effort in making that overture, but we don't really believe you, because lots of candidates have said that and then left us at the altar.  And even if it's true, you really don't want the rumor that that you prefer us to reach someone else.  Best to keep mum until you have actual offers.

On the other hand, evidence that we are your first choice is taken very seriously.   For example, if you receive an offer from somewhere else, especially from another top department, telling us in time to make a good-faith counter-offer is certainly better than not telling us until it's too late. 


  In fact, can expressing this kind of preference actually hurt a candidate's chances?


No.


  Question 3: To what extent do different departments talk to each-other?


Not at all.  Different departments are competitors; sharing information is counterproductive.

We do, however, gather as much back-channel information as we can, for example by scouring our competitors' web pages to see who they are interviewing and when.   Sometimes I do hear rumors of the form "So-and-so is about to get an offer from X", but those rumors almost always trace back to the candidates themselves.


  one can easily imagine a situation in which lower-ranked schools don't make a candidate an offer because they expect she will get an offer from a higher-ranked school


Unfortunately, yes, this does happen, although I suspect more often at the interview stage than the offer stage.  See "minimize the risk of not hiring anyone at all".  Nothing you can do about it.  Let it go.


  Question 4: Do I just need to relax?


Yes, always.  I recommend building up an immunity to iocaine powder.