key length considerations
As there is some minimal attempt in solving I will answer at least in part.

No 128! would be the number of permutations. But that is not what we are doing, we 128 is already the number of possibilities to combine 7 bits $2^7$ if you have 8 of these then you get: $128^8$ or alternatively bitwise $2^{56}$

yes

no, 26 letters. need $\log_2(26)$ bits or just over 4.7 bits per letter. Assuming compact representation and after rounding it 8 independent letters need 38 bits.

I'll leave something for you still.