When I have about three pages opened up in safari let's say I want to go from one web page to the other the whole page reloads. does this normally happen to every one?
Yes, it happens like that with me, especially if I use another application before returning to the page. I guess the iPhone unloads the page from memory once it needs it for something else.
No, it only caches a certain amount of data. If you keep only 1 or 2 tabs open, it will mostly keep those fine, but as you add more tabs, it will likely dump data from earlier ones. And if you go to another app, it might dump them all.