I self hosted a Lemmy instance for a little while, but I stopped over concerns of malicious actors posting CSAM which would then get federated over to my server. I don't have the appetite to deal with that, and I'm glad I shut it down because just a few weeks later there was a big instance of it happening all over Lemmy, and I'm sure I would have had to deal with cleaning it up on my server too. Just something to keep in mind.

Otherwise though, the setup process isn't too complex.

Yes, you can restrict image size and the creation of communities.

I just setup my own instance a few days ago, if it interests you, do give it a shot!

IIRC reading about it, all data for posts is set to be deleted automatically on a schedule. The catch is that schedule is every 6 months, and it is not configurable currently. From what I read, textual posts of lemmy doesn't consume that much, many reported anywhere from 1-10 GB of data over 6 months - ofcourse it all depends on what kinds of communities are subscribed to your instance.

Not sure if you can restrict image sizes or numbers - atleast not through the admin UI, maybe it's possible through config. You can set global rate limit on image uploads though to not go too crazy.

You can set it so only admins can create communities, or admin would have to approve new communities, or free for all.

If you already have a server, try it out. It shouldn't be tricky, particularly if you're familiar with docker.

I run my own server, not sure on post retention or image size or even number of images. But you can make it so that only you can make communities, you can even make communities admin post only.

I would give the docs a good read and maybe have a look at the GitHub repos

You could definitely find your questions answered in the docs at the very least. Couldn't hurt to have a look.