The php.ini file works based on directory and applies to all subdirectories inside it. So, if you put it in your store root, it will affect everything that's in root - your frontend, your admin, and even other websites if you have them installed as a subfolder (ie. yourdomain.com/blog or yourdomain.com/whatever).
If you have an existing php.ini it's always best to just ADD a new line with your new directive.
Yes, it would.
As long as you keep this setting just for your admin, meaning in your store_root/YOUR_ADMIN/php.ini, I don't see how it could cause problems. I wouldn't set it as a global value for the entire domain or entire server, there's a reason why it's limited. But, since the admin is just for you, you probably won't be doind DDoS attacks on yourself from the admin so I guess you can set it to a quantillion if you want, although you should keep in mind you're gonna be hitting your server with a lot of data which will probably need quite some processing power.
Quoting:
What is the purpose of Max Input Vars?
It helps lessen the severity of the DDoS (Denial of Service) attacks using hash collisions.Effects of higher Max Input Vars limit
The max_input_value should always be a reasonable level, which is called the ‘sanity check’. When this limit is exceeded, it makes you more vulnerable to attacks and can drench the server down.
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