1. CIF includes all of California. The CIF is divided into 10 "sections" ranging in size from 6 schools (Oakland Section) to over 600 schools (southern section). It is a little confusing when you read posts online, because people from different sections refer to their section championship by different names. In the southern section, if someone says "I'm running CIF this weekend" they mean they are running in their section championship, rather than state as it would seem. I grew up in the Central Coast Section. We said, "I'm running CCS this weekend". Currently I coach in the Sac-Joaquin Section. People here just say, "I'm running sections this weekend". McFarland is in the Central Section Without looking it up, I believe there are somewhere around 100 schools. The north end of that section is around Chowchilla and the South end is right up against the Grapevine (sorry for the CA geography references). McFarland is pretty close to the center of that area.
2. Divisions exist for competitiveness in the team competitions. This ends up splitting the top individual talents among all of the divisions. It is pretty common for the top individual runner on the day to be from the smaller divisions. Division 1 are the largest schools and D5 are the smallest. There is no statewide criterion for school assignment to divisions except for schools smaller than 600 kids enrolled in grades 9-12 are in D5. Otherwise, the divisions are set by the sections as they see fit in order to create competitive equity within each section. This makes it kind of rough on some schools when we advance to state. For example, my school has around 700 kids. We've been in Division 4 for my entire time coaching. It used to be that there was a cap of (I believe 1,050) student enrollment for D4 teams. The years that we advanced to state, we could be pretty competitive. Recently, the southern section has been letting teams from schools of almost 1,500 students into Division 4. Predictably, Division 4 has gotten much tougher over the last 3 years.
3. Each section gets to send a specified number of teams per division, based on section size and the historical performances of that section's teams at the state meet (it is based on the # of teams placing in the top 10 for the previous 4 years). For instance. Our section has a baseline of 2 guaranteed berths to the state meet per division based on it's size. In some of the divisions, our section teams have done very well at the state meet, earning 1 or 2 extra berths to state for our division. So, the number of teams allowed to advance to state from each section changes every year. To further complicate matters, some sections "reward" teams success by promoting them to higher divisions. This is how McFarland ended up in Division 1. Individuals not on good teams can also qualify for the state meet. For instance, in our division of our section, the top 2 finishers at the section championship were from teams that were very weak this year. Those 2 girls still advanced to the state meet, where our section champion finished 4th. The number of individuals that advance from each section is 5.
Note: Not all sections have teams in all divisions. For example, the Oakland City Section only has teams in Division 1, while the Northern Section does not have any teams larger than Division 3. This is due to the fact that most of CA's population is either along the coasts or in the southern 1/3 of the state.
4. To answer your question, see my answer to #3. Because of its size, the Southern Section is very competitive. A 17:30 5k for a boy would never advance as an individual. Maybe you could be the 6th or 7th man on a team that advanced. However, you might advance as an individual from a smaller division from a weaker section. The final qualifier from our section in D5 ran 18:12 on our very difficult and slow section championship course (probably worth right around 17:30 on a course like the state meet).
5. Winning state in CA is no joke either as a team or as an individual! You can add to your list of guys that have won: Meb Keflezighi (2004 olympic marathon silver), German Fernandez (the following year, he set the world junior record for indoor mile), Julia Stamps (college career cut short by horrible broken leg). Marc Davis (Olympic finals in Steeple) and many more who would go on to help college teams win national titles or qualify for U.S. Olympic trials.
To answer your bonus question: Almost everyone who wins a divisional race at state will at least begin a college running career. Some kids will have "shot their wad" in high school and never progress any further, while others who finished further down the list will progress and become elite adult level runners. For example, you can probably find Shannon Rowburry's name on that document you posted. Look in the early 2000s, Sacred Heart Cathedral HS from San Francisco. I believe her best time at state was never better than 18:30, but she went on to run sub 4:00 for 1500m.