While what Spazzy says is true, the question is about the leadership. [edit: ninja'd me]
Well, I think it's better if it would be like "a player can lead only 1 official faction at a time", just so that all the factions can get enough love and there'd be more than one perspective to roll things along.
I don't think there are any multiple factions with the same leader right now though, in the past there were some.
To answer your questions directly:
1. It's just simply allowed, because there was no apparent reason not to.
When they are in conflict, probably one person (or a team) decides how this conflict will turn out, and others will just have to play with the cards they are given.
2. Why would this disallow people to progress to official status?
3. It certainly is not a direct reason why the server dies.