1- iiifhosting is not upscaling images. It only shows image information which image have. There is no conversion in image to high resolution. In info.json you are getting image info how much width height it has and tiles sizes. Tile sizes formula is (smallest dimension) * 1/2n > endpoint.iiif.min_tile_size
endpoint.iiif.min_tile_size is which you set in cantaloupe.properties file default is 512x512
2- http://bafdev.iiifhosting.com/iiif//e6ebb551407a5c64903d100ab8ba9199bb264d1c17cdcf0a9e745cd6c5aea432/full/full/0/default.jpg
Regarding your second point there is restriction to get full resolution image on iiif hosting so you cant get full image of their client files. Therefore they are serving maximum of 1000x1000 image.
Second thing is if iiifhosting client have 2gb images (very high res) and you request 100 images on your site than it will overwhelm image server.